Recurring Deposit – RD Interest Rates 2025

RDs are an investment tool that allows investors to make regular monthly contributions and save money for the long term. Investors can choose the tenure and the minimum monthly deposit based on their convenience.

Compared to fixed deposit schemes, RDs offer more flexibility and are typically preferred by individuals who want to start an account to save money and build a rainy-day fund.

Highlights of 2025 RD Interest Rates

Note: Differs from Bank to Bank

*Post office recurring deposit can be opened with the minimum amount of Rs. 10. *The interest on RD is compounded quarterly.

Almost all banks in India offer RDs, and the interest rates are highly competitive, typically ranging from 6% to 7%. The interest depends on the market trends at the time of account creation.

The tenure of an RD can vary from 7 days to 10 years, making it a versatile investment option. RD schemes are an excellent choice for salaried individuals who earn a fixed income and can invest a regular amount each month.

Latest update:
The CBDT notifies Form 12BBA, a declaration form, to be submitted by the eligible senior citizens to the specified banks to take relief from filing the ITR.

In Budget 2021, it has been proposed to exempt senior citizens from filing income tax returns if pension income and interest income are their only annual income sources. Section 194P has been newly inserted to enforce that banks deduct tax on senior citizens of more than 75 years of age who have a pension and interest income from the bank.

Comparison Between Other Bank Rates

Investing into RD : Is it Really Beneficial?

Here’s an example comparing SIPs and RDs. If you invest ₹10,000/month in an RD for 15 years with an 8% return, you’ll have ₹34.6 lakh. In contrast, investing the same amount in a SIP with a 15% return will give you ₹66.8 lakh. Despite equal investments, SIPs provide higher returns than RDs.

Other Investment Options

If you're comfortable with regular investments, consider mutual fund SIPs. A SIP (Systematic Investment Plan) invests your monthly deposits in mutual funds, offering higher returns than traditional RD schemes. On average, SIPs provide returns of 12%-18%, significantly higher than RDs.

Benefits of RD

• RD schemes allow you to save money on a regular basis and the minimum deposit amount can be as low as RS.10.
• The tenure is also flexible, and you can choose from 7 days to 10 years depending on your convenience.
• Minors can also open RD accounts under the supervision and guardianship of their parents.
• RD schemes allow for a higher rate of interest (usually 0.5% more) for senior citizens.
• Premature withdrawals are allowed under RD. However, this may come with a small penalty.
• RD can be used as collateral for taking loans. You can take up to 80%-90% loans on your RD amount.

Tax Benefits on RD

Similar to other personal tax-saving and investment instruments, recurring deposit schemes also attract taxes. A TDS of 10% is deducted on the returns accrued from an RD if the total interest exceeds Rs.10,000 in a single financial year. Compare this to the SIP scheme, and you can see that SIPs are more beneficial for the long term. Since long-term gains from equity are tax-free, any SIP which invests in ELSS (Equity Linked Mutual Funds) is also tax-free after one year.

RD Interest Rate Calculator

Interest on RD is compounded quarterly, in most banks.

The formula for this is : M = R[(1+i)^n-1]/(1-(1+i)^(-1/3) )

In this, 
M = Maturity Value 
R = Monthly Installment 
n = Number of quarters 
I = Rate of interest/400

So, if you invest in RD and put in Rs. 5,000 per month for a year, at the interest rate of 8%, your total value will be calculated as:

R = 5000 n = 4 (one year has four quarters)

I = 8.00/400 M = Rs. 62, 647 in one year

Which is the Best RD – How to Choose

When selecting an RD scheme, there are a couple of important factors to consider:

1. Interest Rates: Compare which bank offers the highest interest rate for your deposit amount and the tenure you have chosen.
2. Penalty Charges: Look for banks with the lowest penalty rates for premature withdrawals. This ensures your funds remain liquid, and you can withdraw them when needed without losing too much money.

By evaluating these criteria, you can make an informed decision and choose the best RD scheme that suits your needs.

Documents Required 

Premature Withdrawal of RD

Most banks levy a small penalty on premature withdrawals of funds from RD accounts. However, partial withdrawal of funds is not allowed in many banks.

If you miss several consecutive payments, the bank may choose to close down your RD account. Some RD schemes are also flexible in the way they allow you to make payments anytime during the month.