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Recurring Deposit Account: Do not make lump-sum savings every month. Invest – open a recurring deposit account, know what is RD?

RD account – RD account gives the opportunity to deposit small amount every month. The interest rate at which you start investing is locked up to maturity.

Whenever we invest, two hope that our money is safe and guaranteed returns on it. Bank fixed deposits meet these two expectations. But for bank FD you only need a lump sum and what to do if you cannot deposit lumpsum money? Arnav Pandya, founder of Moneyeduschool, says that RD account is a good option for such investors, in which you can deposit small amount every month like an installment.

Where can I open RD account?
Can open RD account in bank and post office. You have to deposit rupees every month in RD. Monthly maximum amount can be deposited. An investment of minimum Rs 100 can also be done. RD can be done in the bank from 6 months, 1 year, 5 years to 10 years. There is only one tenure RD in the post office. Post offices offer a 5-year Recurring Deposit Account. Right now the RD of the post office is paying the highest interest at 5.8% as compared to the banks. TDS has to be paid on the interest of recurring deposit.

5 year RD Account interest rate

Post Office: 5.8%
SBI: 5.4%
HDFC Bank: 5.3%

Interest Rate on 1 Year RD Account

SBI: 5.10%
HDFC Bank: 5.10%

If you invest 1000 rupees in RD, then the table below is telling you how much your investment will give you.

How much earning from RD account of 1000 rupees?

Month Rate of interest Deposit amount Interest earning
12 months




24 months




60 months




120 months





You can lock interest on
RD, compounding interest is available on RD Account. The interest rate at which you start investing is locked up to maturity. Suppose you started investing in April 2021 at an interest of 5.3%. Now in the quarter of June 2021, the government decides to reduce the interest on this scheme. Interest is reduced to 5%. But, when you started investing when the interest was 5.3%, then if there is a RD of three years, till the maturity of April 2024, you will get 5.3% interest. Investments on RD interest have to pay tax according to their income tax slab. If interest is more than Rs 40,000, then banks will deduct TDS. Under the Income Tax Act, deduction of 1.5 lakh rupees of section 80C is available only on RD of the post office. Tax is not available on bank RD.

Who should open RD Account?
According to personal finance expert Arnav Pandya, only for those who want to invest small amount every month. Know how long they need this money and keep RD tenure accordingly. The interest paid on RD does not run any furlough, but it protects your original investment with steady returns.



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