FD & RD in India 2026 — The Complete Guide
Fixed deposits and recurring deposits are still the bedrock of Indian household savings — capital-guaranteed, insured up to ₹5 lakh per bank by DICGC, and simple to understand. But the two numbers that actually decide what you take home are routinely misunderstood: the compounding frequency the bank uses, and the tax on the interest. This calculator uses the real quarterly-compounding method Indian banks apply, lets you add the senior-citizen rate bump, and shows your post-tax maturity at your own slab — the number that matters. A ₹1,00,000 FD at 7% for 5 years matures at ₹1,41,478; a ₹5,000 monthly RD at 7% for the same 5 years builds ₹3.60 lakh from ₹3 lakh of deposits.
How Fixed Deposit Maturity Is Calculated
Indian banks compound FD interest quarterly by default. The cumulative-FD maturity is:
A = P × (1 + r / (4 × 100))4 × t
- P = principal (the lump sum deposited)
- r = annual interest rate (%)
- t = tenure in years; the exponent 4 × t is the number of quarters
Use the compounding-frequency selector to switch to monthly, half-yearly, annual, or simple interest. Quarterly compounding beats annual on the same rate because interest starts earning interest sooner — over a long FD this gap is real money. A cumulative FD reinvests each quarter's interest (maximum maturity); a non-cumulative FD pays the interest out and does not compound (steady income, lower final value).
How Recurring Deposit Maturity Is Calculated
An RD takes a fixed deposit every month and compounds the running balance quarterly. The bank-standard formula is:
M = R × [ (1 + i)n − 1 ] / [ 1 − (1 + i)−1/3 ]
- R = fixed monthly instalment
- i = quarterly rate = annual rate ÷ 400
- n = number of quarters = months ÷ 3
Because each instalment only starts compounding from the month it is paid in, an RD always earns less than an FD of the same total value and rate — the early-deposited rupees in an FD simply have more time to grow. The RD's advantage is behavioural: it turns monthly income into a disciplined, capital-safe corpus.
FD vs RD — Which Fits Your Situation
| Fixed Deposit (FD) | Recurring Deposit (RD) | |
|---|---|---|
| You invest | A lump sum, once | A fixed amount every month |
| Best when | You already have the money (bonus, maturity, sale) | You save out of monthly salary |
| Compounding | Whole principal from day one | Each instalment from its own month |
| Returns (same rate) | Higher | Lower |
| Tax on interest | Slab rate | Slab rate |
Senior Citizens Get Three Advantages
- Higher rate: most banks add 0.25–0.50% (some small finance banks up to 0.75%) over the standard FD rate for depositors aged 60+. Tick the senior box above to add the typical 0.50%.
- Higher TDS threshold: TDS kicks in only after ₹1,00,000 of interest from a bank in a year (versus ₹50,000 for others), per the Budget 2025 revision.
- Section 80TTB: a deduction of up to ₹50,000 a year on interest income from deposits — available only to senior citizens, only under the old regime.
How FD & RD Interest Is Taxed in India (2026)
Interest from both FDs and RDs is added to your income under "Income from Other Sources" and taxed at your slab rate. Two points trip people up:
| Item | Rule in 2026 |
|---|---|
| Tax rate on interest | Your income-tax slab (5% / 10% / 20% / 30%) |
| When taxed | On accrual every financial year, not only at maturity |
| TDS threshold (general) | 10% TDS once bank interest exceeds ₹50,000 / year |
| TDS threshold (senior) | 10% TDS once interest exceeds ₹1,00,000 / year |
| No PAN on file | TDS deducted at 20% |
| Avoid TDS if below taxable limit | Submit Form 15G (15H for seniors) at the bank |
TDS is not an extra tax. Whatever the bank deducts is credited against your final tax liability — you reconcile it when filing your return. But you still owe tax at your full slab even if no TDS was deducted (e.g. interest under the threshold), so report it. The accrual rule also means a 5-year cumulative FD is taxed yearly on the interest credited, not in one lump at the end.
The 5-Year Tax-Saving FD — Read the Fine Print
A tax-saving FD gives a Section 80C deduction up to ₹1.5 lakh, but only under the old regime, and locks your money for 5 years with no premature withdrawal or loan against it. The interest is still fully taxable. Under the new regime — the default for most filers from FY 2025-26 — the 80C benefit disappears, so a tax-saving FD becomes just an illiquid regular FD. Confirm which regime you are in before choosing one.
Common FD & RD Mistakes
- Comparing pre-tax rates. A 7.5% small-finance-bank FD and a 7% large-bank FD can land at the same post-tax return once you account for risk and slab. Compare the post-tax row.
- Laddering ignored. Splitting a large deposit across multiple maturities (a "ladder") gives liquidity and lets you reinvest at higher rates if they rise, instead of locking everything at one rate.
- Forgetting the ₹5 lakh DICGC cap. Deposit insurance covers only ₹5 lakh per bank per depositor. Spread very large balances across banks.
- Breaking an FD early. Premature withdrawal usually costs a 0.5–1% penalty on the applicable rate — it can wipe out months of interest.
- Not filing 15G/15H when eligible. If your income is below the taxable limit, failing to submit the form means TDS is deducted and you must claim a refund later.
Frequently Asked Questions
What will ₹1 lakh in an FD become in 5 years at 7%?
With quarterly compounding, a ₹1,00,000 FD at 7% for 5 years matures at about ₹1,41,478 — roughly ₹41,478 of interest, before tax. In the 30% slab, the post-tax interest is closer to ₹29,000.
How much will a ₹5,000 monthly RD give me?
A ₹5,000 monthly RD at 7% for 5 years deposits ₹3,00,000 and matures at about ₹3.60 lakh, with roughly ₹59,664 of interest. For 1 year it matures at about ₹62,311. Use the RD mode above to try your own figures.
Is FD interest compounded monthly or quarterly?
Indian banks compound FD interest quarterly by default for cumulative FDs. A few offer monthly compounding; you can model either with the frequency selector. Non-cumulative FDs that pay interest out do not compound at all.
Are FD and RD safe?
Bank FDs and RDs are capital-guaranteed and insured up to ₹5 lakh per bank per depositor by DICGC. They carry no market risk — the trade-off is a lower long-run return than equity, especially after tax and inflation.
Can I avoid tax on FD interest?
You cannot avoid the tax itself — interest is taxable at your slab. You can avoid TDS by submitting Form 15G/15H if your income is below the taxable limit, and senior citizens can claim up to ₹50,000 under Section 80TTB (old regime). Spreading deposits to keep per-bank interest under the TDS threshold only delays, not removes, the tax.
Does premature FD withdrawal lose interest?
Yes. Banks pay interest at the rate applicable for the period the deposit actually stayed, minus a penalty of typically 0.5–1%. Breaking a 5-year FD after one year can earn far less than the booked rate.
Which gives more — FD or RD?
For the same rate and tenure, an FD of a value equal to the RD's total deposits earns more, because the full FD principal compounds from day one while RD instalments compound only from when each is paid. RD wins on discipline and cashflow fit, not on raw return.