RDs provide assured and safe returns at fixed interest rates, unaffected by market volatility. With flexible tenures ranging from 6 months to 10 years, they can be tailored to meet short- or long-term financial goals.
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A recurring deposit (RD) is an investment instrument that is made available by banks in India. This unique-term deposit scheme allows citizens to make regular investments and earn guaranteed returns on maturity.
But the calculation of the maturity value of an RD is not easy as the interest rates are generally compounded quarterly, which makes it more complex.
Various online platforms help people determine the maturity value online for an RD of any duration, amount, or interest rate. Here is how to calculate the maturity value of a recurring deposit.
The maturity amount of an RD is calculated by this formula:
A = P(1+r/n)^nt
A = Final maturity amount
P = Principal amount
R = Annual interest
n = Number of times interest compounded every year
t = Number of years
Recurring deposits are compounded quarterly generally. Here is the formula to calculate the maturity of an RD compounded quarterly:
M = (R x [(1+r)^n - 1]) / (1- (1+r)^-1/3)
M = Maturity value
R = Monthly installment
r = Rate of interest
n = Number of quarters
This formula makes the complex maturity value calculation for quarterly compounded interest rate way easier.
The following are the benefits of the online RD Maturity Calculator:
A person can deposit in an RD scheme for a minimum tenure of six months, and a maximum tenure of 10 years.
Interest up to Rs.10,000 earned from recurring deposit is tax free. Interest amount above Rs.10,000 will incur TDS (Tax Deducted at Source) of 10% and will be deducted by the bank.
No tax is deducted on the recurring deposit interest if the interest earned is up to Rs.10,000.
Yes, RD can be closed before maturity. In case, it is closed within a month then no interest will be paid and only the principal amount will be returned to the depositor.
Yes, TDS is applicable on recurring deposit scheme which depends upon the individual’s income tax slab rate as applicable.
Yes, the monthly instalment of the RD gets deducted from the account automatically. It gets deducted on the same date every month, when the initial investment was made.
No, you cannot increase the monthly instalment of an RD once you have started the RD. The standing instruction such as instalment amount, tenure, and other details cannot be altered once an RD has been started.
The investment along with the interest amount will be received during maturity. But only interest amount is taxable during maturity. Individuals need to add the RD interest to the 'income from other sources' option while filing income tax returns.
To save tax deduction on RD interest, you need to submit a declaration through Form 60 to the bank. This will save 20% TDS on the interest earned from recurring deposit by the bank.
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