How this instrument works
A recurring deposit takes a fixed amount every month rather than one lump sum, which is what separates it from a fixed deposit and from a savings account paying interest on whatever balance happens to sit there. It suits someone with steady income and no spare lump sum today — a salaried worker setting aside part of each paycheck, a parent building toward a child's school fees, or a saver using India Post's recurring deposit scheme as a forced-discipline alternative to a savings account that is too easy to dip into. The trade is liquidity for a locked-in rate: miss an installment and most banks charge a small penalty rather than simply skipping that month's interest.
The formula looks unusual because it treats every monthly installment as its own miniature deposit, each earning interest only for the months remaining between when it was paid in and the maturity date. The first deposit sits for nearly the full tenure and earns the most; the last deposit is credited right at maturity and earns almost nothing. Add up those shrinking windows — n, n minus 1, n minus 2, down to 1 — and the total comes to the triangular number n(n+1)/2, which is exactly the term sitting inside the maturity formula's second half.
What the arithmetic assumes matters as much as what it returns. This formula prices interest as if it accrues in flat monthly steps on each deposit, the approximation most RD calculators use; several banks actually compound the credited interest every quarter, which usually nudges the real payout a little above this figure as the rate or tenure grows. It also leaves out two things a saver in India will meet on the actual statement: a penalty deducted for any missed installment, and tax deducted at source once total interest from one bank crosses the threshold set by law in a given financial year.
- Enter the fixed amount you will pay in every month in Monthly deposit, ₹ — the same figure each month, with nothing added or skipped.
- Set the number of monthly installments in Tenure, months — a five-year recurring deposit is 60, an eighteen-month one is 18.
- Enter the bank's quoted yearly rate in Annual interest rate, % — type 7 for seven percent, not 0.07.
- Read Maturity value, ₹ for the payout on the final installment date: every deposit made, plus every month's interest, summed together.
Worked example — ₹5,000 a month for a year
Set Monthly deposit, ₹ to 5,000, Tenure, months to 12, and Annual interest rate, % to 7. The instrument returns a Maturity value, ₹ of 62,275: the twelve deposits total ₹60,000, and interest supplies the remaining ₹2,275 on top.
That ₹2,275 is not simple interest charged once on the full ₹60,000; it is twelve separate interest calculations added together, one per deposit, each running for a different number of months. Written in deposit-months, the twelve installments together earn interest for 12+11+10+…+1, which is 78 deposit-months — the triangular number n(n+1)/2 built into the formula. At 7% a year, 5,000 × 78 × 7 ÷ 1,200 comes to ₹2,275, matching the instrument exactly.
Questions
Who actually opens a recurring deposit instead of a fixed deposit?
Someone paid monthly who wants to save without having a lump sum to hand today — a salaried employee setting aside part of each paycheck, a parent saving toward tuition due in a few years, or a small saver using India Post's recurring deposit scheme, which runs on this same style of formula. A fixed deposit suits money you already have sitting in the bank; a recurring deposit suits income still arriving one payday at a time.
Why does the last monthly deposit earn almost no interest?
Because interest here is charged only for the months between when a deposit is paid in and the maturity date, and the final installment is paid in right at (or just before) maturity — it has essentially no time left to earn anything. The first deposit, by contrast, sits for nearly the entire tenure, which is why it contributes the largest share of the total interest even though every installment is the same size.
Will my bank's real maturity payout match this exact figure?
Usually close, but not always exact. This formula assumes interest accrues in flat monthly steps on each deposit; many banks instead compound the credited RD interest every quarter, which tends to push the real payout slightly above this number once the rate or the tenure grows larger, though the gap on a short, modest deposit like the worked example stays small. Check your bank's own RD interest-crediting schedule for the figure it will actually pay.
What happens if I miss a monthly installment?
Most banks charge a small penalty on the missed installment, often a fraction of a percent of that month's deposit deducted at maturity, and this formula does not model it — it assumes every installment lands on schedule. Miss enough installments in a row and some banks close the account early and return the balance at a reduced rate, so a missed month costs more than just that month's interest.
Is the interest on a recurring deposit taxed?
Yes — RD interest is added to taxable income like any other interest, and Indian banks must deduct tax at source once a saver's total interest from that bank crosses the threshold set by law in a financial year. This calculator returns the gross contractual maturity figure only; it does not subtract tax, since the amount withheld depends on the saver's total interest across accounts and their tax status, not on this one deposit alone.
How is this different from a monthly SIP into a mutual fund?
A recurring deposit's rate is fixed the day the account opens, so this maturity value is a contractual certainty, not a forecast. A Systematic Investment Plan puts the same fixed amount into a mutual fund each month, but the return floats with the market and carries no guaranteed formula — the two pay monthly installments in the same shape but carry entirely different risk, and comparing their end figures as if they were equivalent misreads what each one promises.
References
- Reserve Bank of India — rules governing bank deposit interest
- India Post — small savings and recurring deposit schemes
- Income Tax Department, India — tax deducted at source on interest
Read this first: This instrument shows arithmetic, not advice. Real offers add fees, taxes and terms that vary by lender and place — verify the figures against your actual paperwork before deciding anything.