Recurring Deposit in simple words
An RD is a monthly savings plan: you deposit a fixed amount every month for a fixed tenure, and the bank pays quarterly-compounded interest on the whole pool. It's the easiest forced-saving habit — ₹5,000/month for 5 years at 7% grows to about ₹3.6 lakh (₹3 lakh deposited + ₹60k interest).
RD vs SIP: RD gives guaranteed (but taxable) returns; a SIP in a mutual fund has no guarantee but historically gives higher long-term returns. Many people use RD for short goals (1–3 years) and SIP for long goals (5+ years).
Frequently Asked Questions
A>M = P × [(1+i)ⁿ − 1] / [1 − (1+i)^(−1/3)], where i = rate/400 (quarterly), n = tenure in quarters.
A>Most banks allow 2–4 missed installments with a small penalty; some allow a grace period. Check your bank's RD rules.
A>Yes — like FD interest, it's added to your income. TDS applies if total interest income crosses ₹40,000/year (₹50,000 seniors).
A>If you have a lump sum now → FD; if you want to build savings from monthly income → RD. Both are safe and bank-guaranteed.
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