What is RD investment Scheme | Recurring Deposit | Complete Step By Step guide | 1 Best Guaranteed returns

Hello Friends, Welcome to my Blog Investinfy.com the best financial blogs where you will be able to read about the end to end information on many investment schemes and financial topics. In this Blog post we will be focusing on end to end information on RD Investment Scheme.

Generally when we want to invest money on any investment scheme , we always asks our friends and relatives that where we can invest ? and they suggests the investment schemes which they like most. Then we invest as per their suggestions, that is good as we consider them as our well wisher , But here I want to mention one thing, if we know end to end information of each investment schemes at least it will help us to understand if that investment scheme is good for us or not.

Hence it is better to have a complete idea about each investment scheme where we invest. Therefor this blog will help you to know end to end information of many Indian investment schemes available right Infront of you.

In this blog post I will be explaining my analysis on RD Investment scheme. This will be a complete guide on RD investment scheme. Please read till end of the blog post to know the complete information about this RD investment scheme. Lets get started.

Table of Contents

What is RD?

RD stands for Recurring Deposit. RD is savings scheme where you can deposit a fixed amount every month for the chosen tenure. In this saving scheme, the interest earned will be compounded on quarterly basis.

This scheme is suitable for those people who wants to save a small amount every month and then receive a big amount at the end of the tenure.

I called this saving scheme as piggie box saving scheme with guaranteed returns. Generally at home everyone will have some piggie box where they keep their small small amount and at the end of the year they can see a lump sum amount in the piggie box . This saving scheme is also same but here you will be saving in bank and your money will earn money for you in the form of interest. Hence what could be better then this.

This saving scheme will also help you to be financially disciplined that every month you will start saving some money.

How Does RD work?

  • Step 1: Choose the monthly Deposit amount you want invest.
  • Step 2 : Choose the tenure.
  • Step 3 : Deposit the fixed amount every month for the chosen tenure.
  • Step 4 : At the end of the tenure you will get the maturity amount ( Deposit Amount + Interest earned ).


  • Safe Investment Option
  • Guaranteed returns
  • Quarterly compounded interest
  • Helps you to save small amount every month and creates the habit of regular savings.
  • Senior Citizens get extra interest rate compared to other customers
  • RD can be used as a security to get loan

Income Tax Benefits

Income Tax benefits will be same on both old and new tax systems. No Income tax benefits on the monthly deposit amount.

There is a TDS (Tax deducted at source) from bank if the interest received more than Rs. 40000 in a financial year. This is for ordinary citizens. The new TDS limit of Rs. 40000 is from 01-April-2019 onwards. Earlier the limit was Rs. 10000 .

For Senior citizens, TDS limit is Rs. 50000 from 1st April 2018 onwards. Earlier the limit was Rs. 10000 .

Bank will provide TDS certificate for the tax deducted.

Interest received is taxable. you need to declare the interest income under ” income from other sources” during your tax returns filing and pay the income tax as per your income tax slab.

Depending upon the term of Recurring Deposit, you can choose to pay the tax either on maturity or every financial year.

Who can open the account ?

  • Any resident individuals can open the individual account.
  • Joint account can be created by 2 or more individuals.

Deposit Amount

  • Minimum Monthly deposit is Rs. 100
  • No Limit on the maximum monthly deposit amount
  • Monthly deposit amount should be in multiples of Rs. 10
  • once you decide the monthly deposit amount , it can not be changed later on.

Penalty for Non-deposit

You need to pay the penalty charges if you do not deposit the specified amount for a any particular month. Penalty charge varies from bank to bank.


  • Minimum terms – 6 months
  • Maximum terms – 10 years
  • Term should be in multiples of three months. for an example 6 months, 9 months, 12 months, 15 months and so on.
  • few banks offer terms up to 20 years.

Compounding frequency

Quarterly compounding frequency is followed in this scheme

RD Interest rate

Interest rate is same as the TDR and STDR (Fixed Deposit) for the tenure of Recurring Deposit. Interest rate on the day of your RD account opening will remain same throughout the tenure of Recurring Deposit. It will not change even if there are changes to the interest rate thereafter. the Interest rate varies from bank to bank. For more information about the FD interest rate read here

Interest Credit Method

You will receive interest amount upon maturity of the scheme along with the deposit amount.

Pre-Mature closure

Pre-mature closure rules will be the same as TDR and STDR (Fixed Deposit) accounts.

Premature Closure of RD is possible . But there will be a penalty for the pre-mature closure. The penalty amount is generally 1% of the interest earned. Interest will be payable for the duration for which the TDR was kept minus the penalty amount. The penalty amount may change from time to time.

Loan facility

Loan facility is available up to 90% of the account balance (deposit amount plus accrued interest) in RD account.

Nomination facility

Nomination facility is available for Recurring Deposit Investment scheme. You can either nominate at the time of account opening or after opening the account (but before maturity).

Recurring Deposit Saving Projection Table

Let us take an example and see how much we can save and earn by saving small small amount monthly for a specific period.

Period in yearsMonthly Deposited Amount in INRGeneral public Maturity Amount in INR (interest rate 5.40%)Senior citizen Maturity Amount in INR (interest rate 6.20%)
5 5000344850352163
Recurring Deposit saving Projection Table


To conclude this saving scheme, this is very good saving scheme for those people who does not want to take risk for their money and wants to save money for their children education and other committed responsibilities like marriage and all.

As per my case study, when I asked many of the Govt officials like teacher , doctors, civil services official they have opted this saving scheme in this way.

  • Every month they deposit some amount into their recurring deposit account and after 2 to 3 years they withdraw a lump sum amount from the recurring deposit account and put it for fixed deposit. they continue to repeat this process and accumulate a good saving amount after 10 to 15 years.
  • This Accumulated amount they can spend for their children’s higher studies and marriage etc.
  • Also many people opt this savings scheme for short term goals like purchasing car, household furniture etc.

FAQ about RD saving scheme

Is it possible to transfer my RD account from one branch to another branch?

Yes RD accounts can be transferred from one branch to another branch without any extra cost.

I am a NRI can I open RD account ?

NRI (Non resident Indians ) can not open residential recurring deposits account. But they can open NRI recurring deposits accounts and it is a different scheme completely.

What will be the penalty if I close the RD account before maturity period?

The penalty amount is generally 1% of the interest earned.

Add a Comment

Your email address will not be published. Required fields are marked *