How RD interest is calculated
Most Indian banks compound RD interest every quarter. Each monthly deposit earns interest for the time it stays in the account, so the first deposit earns the most and the last earns the least. The calculator adds up each instalment as:
P × (1 + r ÷ 400)months left ÷ 3
where P is the monthly deposit and r is the annual rate in percent.
Frequently asked questions
Is RD interest taxable?
Yes. It is added to your income and taxed at your slab rate. Banks deduct TDS once the interest crosses the yearly threshold.
What if I miss an instalment?
Banks usually charge a small penalty per missed month, and some close the RD after several missed instalments. Check your bank's terms.
Is post office RD calculated the same way?
Yes, India Post RDs also compound quarterly. The rate is set by the government every quarter.
Sources
- Reserve Bank of India ↗ – policy repo rate
- India Post ↗ – post office RD rates