RD Formula

Finance Formula • Published on September 01, 2026 • Last updated September 01, 2026

Mathematical Equation

$$M = \sum_{i=1}^{k} P \times \left(1 + \frac{r}{4}\right)^{4 \times \frac{k - i + 1}{12}}$$

Variable Definitions

Final maturity value of the Recurring Deposit

Monthly installment amount deposited

Annual interest rate (as a decimal)

Total number of months (deposit tenure)

Detailed Explanation

In-Depth Guide

A Recurring Deposit (RD) is a savings tool that allows individuals to deposit a fixed sum monthly for a predefined period. Similar to a Fixed Deposit, it offers a guaranteed rate of interest, usually compounded quarterly, but without requiring a large initial lump sum.

How to Calculate: Step-by-Step

1. Identify the fixed monthly deposit ($P$). 2. Identify the annual rate of return ($r$) offered by the bank in decimal form. 3. Determine the tenure in months ($k$). 4. For each monthly payment from $i = 1$ to $k$, calculate the compound interest earned from the day of deposit until the maturity date (compounded quarterly, which corresponds to the exponent $4 \times (k-i+1)/12$). 5. Sum up the compounded amounts of all $k$ installments to calculate the total maturity amount ($M$).

Worked Calculation Example

A person deposits $1,000 every month for 12 months in an RD account at an annual interest rate of 6% compounded quarterly: - Monthly Deposit ($P$) = $1,000 - Annual rate ($r$) = 6% = 0.06 - Total months ($k$) = 12 - Cumulative Invested Amount = $1,000 × 12 = $12,000 - Maturity Value ($M$) = $12,396 - Total Interest Earned = $12,396 - $12,000 = $396

Common Use Cases

Calculating maturity values of systematic bank savings
Comparing RD options of different banks
Budget planning for short term financial milestones without market risk

Frequently Asked Questions

Banks may charge a nominal penalty for delayed payments. If multiple consecutive installments are missed, the bank might close the RD account and return the principal with reduced interest.

Yes, TDS rules for RDs are identical to those of FDs. If interest income across all term deposits in a bank exceeds the tax threshold (e.g. ₹40,000 for individuals), TDS is deducted at 10%.

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