Each monthly instalment earns interest only for the months it is actually invested. This calculator compounds every instalment separately at quarterly rests rather than using a shortcut formula, then applies your slab.
Your first instalment earns for the full term. Your last earns for one month. That is why RD returns feel lower than the quoted rate.
In an FD the whole amount earns for the whole term. In an RD only the first instalment does. The last instalment earns for a single month. So on a 5-year RD your money is invested for an average of roughly half the term — which is why the maturity value looks modest against the headline rate. That is arithmetic, not a bad product.
Indian banks pay RD interest at quarterly rests. Rather than using the compressed textbook formula, this calculator compounds each of your instalments individually for the exact period it stays invested, then adds them. It matches bank statements more closely, particularly on tenures that are not whole years.
RD interest is fully taxable at your slab rate and TDS applies under Section 393(1) of the Income-tax Act 2025 once interest from that bank crosses ₹50,000 (₹1,00,000 for senior citizens). Crucially, RD and FD interest from the same bank are added together against a single threshold — a lot of depositors miss this and are surprised by the deduction.
The calculator does the arithmetic. TaxSphere — our free case-law library, 1,184 authorities and the Act in full — has the judgments, the circulars and the statutory text for the same provision.
