How RD interest is calculated
Each monthly instalment earns interest for the months it stays deposited, compounded quarterly. ₹5,000 a month at 6.5% for 5 years means ₹3 lakh deposited and about ₹3.55 lakh at maturity.
RD vs SIP
An RD gives a fixed, guaranteed return and suits short goals under three years. A SIP in a debt or equity fund is market-linked but usually beats an RD over longer periods and is taxed more efficiently.
Post office RD
The India Post 5-year RD pays a rate set by the government each quarter and allows one missed instalment per month with a small default fee. It is popular for its reach in smaller towns.
Frequently asked questions
Is RD interest taxable?
Yes, at your income tax slab, and TDS applies above ₹50,000 a year like fixed deposits.
Can I withdraw an RD early?
Yes, with a penalty on the interest rate, typically 0.5–1%.
What is the minimum RD tenure?
Six months at most banks, five years for the post office scheme.