Fixed Deposits
How Recurring Deposit (RD) interest is calculated
Indian commercial banks compound RD interest on a quarterly basis, with each monthly instalment earning interest for the specific months it stays deposited.
Quarterly compounding mechanism
Unlike simple interest, Indian banks calculate interest on recurring deposits using quarterly compound interest. The instalment deposited in month 1 earns interest for all remaining months, while later instalments earn interest for proportionally shorter durations.
TDS rules on RD interest
Under Section 194A, banks deduct TDS on total recurring and fixed deposit interest if aggregate interest across all branches exceeds ₹40,000 in a financial year (₹50,000 for senior citizens). Submitting Form 15G or 15H can prevent TDS if total income is below the taxable threshold.
Premature closure and penalty
Withdrawing an RD prior to maturity is permitted by most banks, but typically reduces the applicable interest rate by 0.5% to 1% below the contracted rate, calculated for the period the deposit actually remained with the bank.
How to check an FD estimate
For a cumulative FD, calculate A = P × (1 + r/n)^(n × t). With ₹5,00,000 at 7.25% for five years and quarterly compounding, the result is about ₹7,16,130; estimated interest is about ₹2,16,130. Use the bank's maturity advice when its tenure or day-count convention differs.
This guide is for general education. Rules, lender terms, bank terms and individual circumstances can change the result.
Use the relevant calculatorFrequently asked questions
Is the maturity result a bank quote?
No. It is a compound-interest estimate based on the entered inputs; product terms can change actual proceeds.
Does this calculator include TDS or early-withdrawal effects?
No. Check the bank's terms and current applicable tax rules for those details.