RD Calculation Example: Rs 5,000 per Month for 5 Years
Assume you deposit Rs 5,000 a month for 5 years in a recurring deposit at an assumed 5% a year, compounded quarterly. You put in Rs 3,00,000. The interest comes to roughly Rs 39,900 to Rs 41,300 and the maturity value to about Rs 3.40 lakh, depending on how the bank counts each deposit. Your bank's rate and rules decide the real figure.
A Rs 5,000 monthly recurring deposit (RD) for 5 years at an assumed 5% a year, compounded quarterly, grows to about Rs 3.40 lakh. You deposit Rs 3,00,000 and the interest is roughly Rs 40,000. The exact rupee figure moves by a little over Rs 1,400 depending on how a bank counts each month's deposit.
The 5% rate here is an assumption chosen to make the sums easy to follow. It is not a quote from any bank. Always use the rate your own bank or India Post gives you when you open the account.
The example: Rs 5,000 per month for 5 years
Assume you deposit Rs 5,000 every month for 60 months. The assumed interest rate is 5% a year, compounded every quarter, and the rate stays the same for the whole tenure. Banks and India Post can differ in how they count the deposit date, so the table shows two common ways of counting.
| Item | Deposit at month end | Deposit at month start |
|---|---|---|
| Monthly deposit (assumed) | Rs 5,000 | Rs 5,000 |
| Number of months | 60 | 60 |
| Total deposited | Rs 3,00,000 | Rs 3,00,000 |
| Assumed rate | 5% a year, quarterly compounding | 5% a year, quarterly compounding |
| Interest (approx.) | Rs 39,851 | Rs 41,261 |
| Maturity value (approx.) | Rs 3,39,851 | Rs 3,41,261 |
These figures come from compounding each deposit at 5% a year, with interest added every 3 months, from the day it goes in until the end of month 60. Your bank's statement may differ by a few hundred rupees because of its own day-count and rounding rules.
Try your own numbers with the RD calculator. Enter your monthly deposit, tenure and interest rate to see the interest and maturity value.
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Rs 5,000 a month for 5 years at an assumed 5% is entered. Use your bank's rate.
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How the interest builds up
An RD is a stream of small deposits, and each one earns interest only from the day it goes in. Take the first 3 months with deposits at the start of each month. The first Rs 5,000 earns for 3 months, the second for 2 months and the third for 1 month. At 5% a year, simple interest on that is about Rs 5,000 x 5% x (3 + 2 + 1) / 12, which is roughly Rs 125.
Over 60 months the same idea applies to every deposit. Your first deposit earns for the full 5 years, while your last deposit earns for only a month or so. Interest is also compounded every quarter, so earlier interest starts earning interest too.
Why the interest is not 5% of Rs 3 lakh
It is easy to think "Rs 3 lakh at 5% means Rs 15,000 a year". That would be right only if all Rs 3 lakh sat in the account from day one. In an RD the balance climbs slowly from Rs 5,000 to Rs 3,00,000, so the money earns interest for far less time on average. That is also why the total of about Rs 40,000 is more than one year's interest on Rs 3 lakh but less than five years' worth.
Quick check: a simple-interest estimate for this RD is P x n x (n + 1) / 2 x rate / 1200, where P is the monthly deposit and n the months. That gives 5,000 x 60 x 61 / 2 x 5 / 1200 = Rs 38,125. Quarterly compounding makes the real figure higher.
Compared with a lump-sum fixed deposit
For the same assumptions, a one-time deposit of Rs 3,00,000 for 5 years at 5% compounded quarterly would earn about Rs 84,611. The gap exists because a lump sum earns interest on the full amount from the first day, while an RD builds up month by month. The two are meant for different situations: an RD suits money you save from a monthly income, a fixed deposit suits money you already have. This is an illustration, not advice on which to choose. Look at the FD interest calculation post for the lump-sum working.
What if the rate or rules differ at your bank?
- Check the interest rate, the compounding frequency and the tenure on your bank's or India Post's current terms before you open the account.
- Check whether the rate is fixed for the tenure and how a missed monthly instalment is treated.
- Check the rules and charges for closing the RD before maturity. They differ between banks.
- Change the rate in the RD calculator to see how the maturity value moves.
Tax on RD interest
RD interest is part of your taxable income. Banks may deduct TDS on interest above a yearly limit, and the limit and the rate depend on your age and the current rules. Because these thresholds change, check the current figures on the Income Tax Department website. For slabs, see the income tax slabs guide. This post gives an example only, not tax or investment advice, so confirm your own case with official sources or a qualified professional.
Common mistakes with RD calculations
- Working out 5% of the total deposit (Rs 15,000 a year) instead of interest on a growing balance.
- Using a quoted rate from one bank for another bank's RD.
- Ignoring the compounding frequency. Quarterly compounding gives a different result from yearly or simple interest.
- Forgetting that RD interest counts as taxable income.
- Planning around the maturity figure without checking the bank's rules on early closure.
For other savings examples, read the SIP of Rs 5,000 per month for 10 years worked example, and see the full list of calculators.
Tools for this
Frequently asked questions
How much interest does an RD of Rs 5,000 a month for 5 years earn?
At an assumed 5% a year compounded quarterly, about Rs 39,900 to Rs 41,300 on total deposits of Rs 3,00,000, depending on how deposits are counted. Your bank's real rate and rules decide the actual figure.
How often is RD interest compounded?
The example assumes quarterly compounding, which is the usual pattern for bank and post office RDs. Check your own bank's or India Post's terms for the exact method.
Why is RD interest lower than 5% of the total deposit?
Because each Rs 5,000 earns interest only from the day it is deposited. The early deposits earn for years while the last ones earn for a month, so the average balance is far below Rs 3 lakh.
What if the interest rate changes during the RD?
The example assumes one rate for the whole tenure. Check with your bank whether the rate is fixed at opening, and use the RD calculator with the rate you are given.
Can I close an RD before 5 years?
Rules on early closure and any reduction in interest differ between banks and India Post. Read your bank's terms before you open the account.
Is RD interest taxable?
Yes, it counts as income. TDS limits and rates depend on current rules and your age, so check the Income Tax Department website or ask a professional.
Sources
- NSI: National Savings Recurring Deposit Account (India Post RD) (checked 2026-10)
Rules and limits change. Always check the latest official notification or portal before you submit a form.