Recurring deposit

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A recurring deposit (RD) is a savings plan in India where you deposit a fixed amount every month into a bank or India Post. You earn interest at the same rate as fixed deposits, and the money matures on a future date along with all the monthly deposits. It’s like saving a set amount each month in a fixed deposit.

Key features:
- Minimum period is 6 months and maximum is 10 years.
- You can fund the RD with standing instructions, where the bank automatically transfers the monthly amount from your savings or current account to the RD.
- When you open an RD, the expected maturity value is shown assuming you pay every month on time. If a payment is late, the interest is reduced, and the shortfall is deducted from the maturity value as a fixed penalty.
- Interest is compounded quarterly.
- You can get a loan against the RD, up to about 80–90% of its value.
- The interest rate on RD is similar to that on ordinary fixed deposits.

Tax basics:
- Interest on RD is taxable. If the yearly interest exceeds Rs 40,000, banks may deduct TDS at 10%.
- You pay income tax on the RD interest according to your tax slab.
- If you have no taxable income, you can submit Form 15G to avoid TDS; senior citizens (60+) can submit Form 15H to avoid TDS.