Recurring deposits (RDs) are an investment instrument almost similar to fixed deposits. However, you have to make fixed monthly deposits in RDs, unlike a lump sum amount in FDs. RDs create a habit of regular investment among earning individuals. These also instil discipline when it comes to savings. Recurring deposits are offered by the majority of banks and financial institutions.
RD returns calculation can be quite complicated for an average investor to figure out accurately every time. This is where an RD calculator can prove to be immensely beneficial.
A recurring deposit, as the name suggests, is a continuing investment. The returns on these deposits can be challenging to track for investors. The interest is compounded quarterly, and there are several variables involved, which makes the calculations multipart.
An RD deposit calculator eliminates the hassle of computing its returns manually and enables an investor to know the exact amount their deposits will accrue after the relevant period
The only consideration that the investor has to do manually is the TDS deduction. As per new RBI norms, RDs are also liable for TDS deduction; however, there is no uniformity in its implementation across financial institutions, which is why RD calculators don’t take it into account
Apart from that small caveat, an RD amount calculator offers an investor with the following advantages:
■ The calculator enables investors to plan their future finances with greater clarity by providing them with the exact amount their investment will accrue.
■ It’s convenient to use and saves a lot of time for the investors, which they can otherwise use productively.
■ The accuracy of these calculators can never be in question. Accurate estimates are pivotal for prudent financial planning.
The formula to determine RD maturity
There are three variables that go into the calculation of the RD maturity amount. An RD account calculator assigns these variables to a standard formula to arrive at the exact maturity amount
The formula for RD maturity is as follows:
A = P*(1+R/N)^(Nt)
The variables in this equation represent-
| A | Maturity Amount |
| P | RD Instalment each month |
| N | Compounding Frequency (no. of quarters) |
| R | RD interest rate in percentage |
| T | Tenure |
The RD calculator available at the Wise Funds website is straightforward to use and does not require any subject expertise. Here is a step-by-step guide for using this calculator.
Step 1: Input the monthly amount you would be putting in the recurring deposit
Step 2: Enter the number of years and the expected rate of return.
The total value of the investment after the tenure will be expressed within seconds.
Using Wise Funds’s online RD calculator, India comes with its fair share of advantages. Depositors can use this calculator and avail the following benefits:
■ It is a time-saving instrument. It performs the calculations in seconds, and the entire procedure starting with visiting their website takes no more than 1-2 minutes.
■ It is always accurate. There is no chance of any mistakes or ambiguity if you input every variable correctly.
■ This RD amount calculator is free to use as many times as a depositor wishes. You can input one or more of the variables in as many variations you want.
Is TDS applicable on RD?
Yes. Effective from June 1, the Finance Bill, 2015, has made TDS mandatory for all recurring deposits. Note that it is applicable only to the interest accrued on the RD.
What is the minimum amount to start an RD account?
It varies from one financial institution to another. Typically, you may start an RD account with an amount as low as Rs. 500, and deposit the same amount every month throughout the tenure. On a similar vein, there is no limit on the maximum amount you may deposit.
Can I break my RD prematurely?
Yes, it is possible to close your RD account before maturity. Interest will be paid until the date of closing. Your financial institution may also charge a penal fee.
What is RD’s range of tenure?
Typically, RD tenure starts at 6 months and stretches up to 10 years. You can choose tenure in multiples of 3 months after the first 6 months, i.e., 9 months, 12 months, 15 months, and so on.