Recurring deposits (RDs) are an investment instrument almost similar to fixed deposits. However, you have to make fixed monthly deposits in RDs, unlike a lump sum amount in FDs. RDs bulids a routine of regular investment among earning individuals. These also instil discipline when it comes to savings. Recurring deposits are offered by the majority of banks and financial institutions.
A recurring deposit, as the name suggests, is a continuing investment. The returns on these deposits can be challenging to track for investors. The interest is compounded quarterly, and there are several variables involved, which makes the calculations multipart.
An RD deposit calculator eliminates the hassle of computing its returns manually and enables an investor to know the exact amount their deposits will accrue after the relevant period.
The only consideration that the investor has to do manually is the TDS deduction. As per new RBI norms, RDs are also liable for TDS deduction; however, there is no uniformity in its implementation across financial institutions, which is why RD calculators don’t take it into account.
Apart from that small caveat, an RD amount calculator offers an investor with the following advantages:
The formula to determine RD maturity
There are three variables that go into the calculation of RD maturity amount. An RD account calculator assigns these variables to a standard formula to arrive at the exact maturity amount.
The formula for RD maturity is as follows:
M = R [(1+i) n – 1]/ 1- (1+i) -1/3
The variables in this equation represents-
This is the standard formula used in the calculation of RD maturity amount, regardless of the sum invested or tenure. All you need to do is put in the variables.
For example, an individual starts an RD account for an investment of Rs. 500 per month for a tenure of 5 years. The interest accrued on this account is 12%. The final maturity amount on this particular deposit is calculated with the following formula-
M = 500 [(1+12) 5 – 1]/ 1 – (1+12) – 1/3
Solving this equation manually is no mean task. A recurring deposit calculator, on the other hand, will provide you with the exact number in mere seconds. For the records, the answer to this equation is Rs. 41, 243.
The RD calculator available at website is straightforward to use and does not require any subject expertise. Here is a step-by-step guide for using this calculator.
The total value of the investment after the tenure will be expressed within seconds.
Depositors can use this calculator and avail the following benefits:
Recurring deposit is considered a stable financial investment with potentially high returns. You may compare the performances of several other investment schemes for the same amount using online calculators available and make a decision accordingly.
Is TDS applicable on RD?
Yes. Effective from June 1, the Finance Bill, 2015, has made TDS mandatory for all recurring deposits. Note that it is applicable only on the interest accrued on the RD.
What is the minimum amount to start an RD account?
It varies from one financial institution to another. Typically, you may start an RD account with an amount as low as Rs. 500, and deposit the same amount every month throughout the tenure. On a similar vein, there is no limit on the maximum amount you may deposit.
Can I break my RD prematurely?
Yes, it is possible to close your RD account before maturity. Interest will be paid until the date of closing. Your financial institution may also charge a penal fee.
What is an RD’s range of tenure?
Typically, RD tenure starts at 6 months and stretches up to 10 years. You can choose tenure in multiples of 3 months after the first 6 months, i.e., 9 months, 12 months, 15 months and so on.