RD Calculator

The best way to secure financial future is to begin contributing for your long term goals early in your life. Early starters are likely to be better ready for pressing life situations. After all, saving is a habit that needs to be inculcated in the kids as the first lesson for financial management at home.

Nevertheless, it is never too late to start. Whether you are now a college graduate, self-employed, or a salaried individual, regular savings via Recurring Deposits (RD) is not overbearing for your budget. RDs are one of the easiest ways to build a long term corpus without affecting your monthly budget.

For those of you, who love to carefully plan their financial moves, online RD Calculator comes as a must-to-access tool online. Fill the amount that you want to save along with the frequency of contribution or number of months you intend to save for, and rate of interest. Pressing the calculate button, you will instantly get a ballpark estimate of return on your RD account. You can either save according to your goals or according to the monthly surplus you spare at ease.

For example: By saving 2000 every month for 10 years at a rate of 7% p.a. you will accumulate 347,403 on maturity.

You can use online RD calculators to calculate maturity amount or instalment amount according to your needs. The online calculators are convenient as well as helpful tool for basic financial planning. You can also visit a bank's website to access a tool.

It is paramount to understand a financial product before you opt for it. Following features of RDs will help you better understand your RD account:

• Minimal monthly deposits Most banks allow an RD account with a minimum monthly contribution and no limit on maximum deposit. This is why RDs are used by a varied range of customers, from low income groups to high net worth consumers. For example, you can start an RD account with SBI with a small monthly instalment of 100 per month. The minimum limit verily varies from bank to bank.
• Tenure Range You can start an RD account for a pre-defined period of 12 months to 10 years.
• Rate of Interest The rate of interest for RD is much higher than Savings Account and at par with Fixed Deposit. 
• Interest rate proportionate to RD tenure Higher tenure earns you a higher income. So, whenever you apply for an RD, compare the rate of return for various tenures and choose the most lucrative offer.
• Early Withdrawl The withdrawal on RD accounts is allowed only after maturity. Early or mid-term withdrawal attracts penalty charge. There is also a waiting period and withdrawal prior this period will nullify interest earned on your account.
• Credit Value You can avail easy loan against RD as lenders accept RD account value as loan security or collateral.
• Link with the bank account RDs can be linked conveniently with your bank accounts- Savings or Current account, ensuring hassle-free standing instructions or automated payment on time.
• Liquidity Liquidity of deposit is one of the crucial factors to consider. While RDs do impose a prematurity withdrawal penalty, you have a choice of opting for 1 year RD account and curb the lock-in period. So RDs are relatively liquid product to redeem.
• Taxation implication Unlike FDs, TDS is not levied on Recurring Deposits. However, it does not make RDs tax free. The interest earned on RD is taxable. But the tax is levied if the interest earned on your RD is more than 10000.
• An NRI can also open RD account with NRE account.

High interest rate - Recurring Deposits entail higher interest rate than Savings Account. You can use the surplus amount from your bank account and earn higher return month-on-month.

Inculcates Saving Habit- Recurring Deposits directly inculcate saving habit in the depositor. By sparing out a part of income every month, you learn to manage your funds diligently every month.

Idea for Homemakers - Recurring Deposits can be started with minimal monthly contribution and persons with limited income source like Homemakers and pensioners can make good use of RDs without any trouble.

Senior Citizens - Senior citizens above the age of 60 years earn a higher rate of interest on recurring deposits. So, RDs are a lucrative saving scheme for old and retired people.

Ease of Saving - The ease of saving a small amount every month makes RDs easy to open and manage for all categories of individuals. A depositor is less likely to delay the monthly saving even for low income months.

Most banks compound the interest on Recurring Deposits on a quarterly basis.

The RD Calculation is carried out using the formula:

M = R [(1+i) n - 1]

Where,

M = Maturity value

R = RD monthly contribution

n = tenure

i = interest rate

You can either manually carry out the calculation for maturity amount of your RD Account or use an online RD Calculator for the same.

Online calculators are free, instant, and hassle free. All you require is to fill the desired fields, and the calculator will share the estimated amount on maturity.

You can also compare different RD offers from various banks and choose the most lucrative one.

• Both Indian and NRI individuals are eligible to open an RD account.
• The depositor can also be a corporate, company, proprietorship, commercial organisation, or any government organisation.
• The depositor must have a valid identity proof.
• Besides, the account can also be opened for minor accounts. Minor RD accounts below 10 years of age are started under the guardianship of parents or legal guardian.
• Above 10 years of age, the minor can open an RD by providing identity proof.

• The application form that is available online as well as offline at the bank's branch.
• Recent passport size photograph of the applicant.
• Identity proof and address proof.
• KYC documents.
• Cheque for first instalment and signature on documentation for standing Instruction.

After submission of request form along with required documents, the account is initiated the next working day.

While SIPs and ELSS extend far higher returns on investment, RDs are preferred by a lot of households for a number of reasons, such as:

• Hassle-free application
• Minimal monthly contribution
• Assured Returns
• Easy on pocket

Let's understand this with an example.

Mrs. and Mr. Ajay Bhardwaj are blessed with a baby girl on 10th November 2018. They decide to open two Recurring Accounts with 2000 per month for 36 months at 7.4% rate, and another 10 year RD at 7 %.

The first RD Scheme will yield 80784 by the end of three years when the child will be ready to school a formal school. The second RD scheme will yield 347,403 after 10 years. They intend to FD the amount after maturity of the second RD and continue saving 2000 in RDs for the next 7 years so that they can build an education fund for her.

Though we haven't considered other factors such as inflation or tax implication, if applicable; the RDs can certainly be used for education planning of children without any hassles. They offer you assured returns with the least risks involved.

Likewise, if you begin to save 2000 per month from the year you get your job, you can approximately accumulate 10-12 Lakh in the 30 years with 7% rate. As RDs are opened for a maximum of 10 years, put the maturity amount after 10 years to an FD account or invest in MF to build wealth. Judicious use of funds can build you much more.

Undoubtedly recurring deposits are one of the safest and easiest ways to build wealth. And online calculators have made it easier for consumers to compare and pick the best deals.