Fixed deposits vs recurring deposits: how interest and maturity are calculated

Bank deposits are the safest and simplest way most families save: you hand over money, the bank pays interest, and at the end you get your money back with the interest added. The two common forms are the fixed deposit (FD), where you deposit a lump sum once, and the recurring deposit (RD), where you deposit a fixed amount every month. The free FD & RD Calculator works out the maturity value and the interest for both, and shows the payout for FDs that pay interest out. This guide explains how each one is calculated so you can compare offers and plan the amounts.

Fixed deposit: one amount, one term

You deposit ₹1,00,000 for 12 months at 7%. What do you get at the end? It depends on what happens to the interest.

Cumulative FD. The interest is not paid out. It is added to the deposit, usually every quarter, so it earns interest too. The maturity value is:

Maturity = P × (1 + r ÷ 4)^(4 × years)

For ₹1,00,000 at 7% for one year, the maturity is about ₹1,07,186, which is ₹7,186 of interest. That is slightly more than the 7% a simple calculation would give (₹7,000) because of quarterly compounding.

Non-cumulative (payout) FD. The interest is paid out to your account regularly, monthly or quarterly, and the deposit itself stays at ₹1,00,000. Monthly interest is about P × r ÷ 12 and quarterly interest P × r ÷ 4. For ₹5,00,000 at 7%:

Payout	Amount each time
Monthly	about ₹2,917
Quarterly	₹8,750

At the end you get back the ₹5,00,000. Payout FDs suit people who need regular income, such as retirees. Cumulative FDs suit people who want growth. The calculator shows both so you can compare.

A bigger FD example

₹2,00,000 for 3 years at 7.25%, compounded quarterly, grows to about ₹2,48,109. The interest is ₹48,109. The same deposit paying interest out would give about ₹14,500 a year in interest, but you would never earn interest on that interest.

For a 5-year deposit of ₹5,00,000 at 7% with quarterly compounding, the maturity is about ₹7,07,389, an interest of ₹2,07,389. Time helps here: the second half of the term earns more interest than the first, because the balance is larger.

Recurring deposit: a small amount every month

An RD is for people who prefer to save from monthly income. You commit to a fixed amount each month for a chosen number of months. Each instalment earns interest only for the time it stays in the account, with quarterly compounding, which is how Indian banks publish RD maturity values.

That has one clear consequence: the first instalment earns the most, because it stays for the whole term, and the last earns the least, because it stays only a month. You can't treat an RD as a lump sum.

Two examples:

RD	Deposited	Maturity	Interest
₹5,000 a month, 5 years, 6.5%	₹3,00,000	₹3,54,954	₹54,954
₹2,000 a month, 2 years, 7%	₹48,000	₹51,640	₹3,640

Compare the first with an FD: if you had ₹3,00,000 on day one and put it in an FD for 5 years at the same rate, you would earn far more, because the whole amount works from the start. An RD is not a better product; it simply matches monthly income.

Using the calculator

1. Open the FD & RD Calculator.
2. Choose Fixed deposit for a one-time amount, or Recurring deposit for a monthly instalment.
3. Enter the amount, your bank's yearly interest rate and the term in months.
4. Read the maturity value and the interest. For an FD you also see what a monthly or quarterly payout would be.

Use the rate that your bank actually offers for your term. Rates differ by tenure, and many banks offer senior citizens a higher rate, usually 0.25% to 0.5% more. Everything is calculated in your browser.

Why your bank's figure may differ slightly

The calculator uses the standard quarterly-compounding method. A bank's own number may differ by a few rupees because it:

• rounds interest each quarter,
• counts days in the quarter slightly differently,
• applies the rate from the actual deposit date rather than in whole months,
• uses a different compounding rule for a special scheme.

Always use the maturity amount on your deposit receipt as the final figure and the calculator for planning and comparing.

Tax on deposit interest

Interest on FDs and RDs is added to your income and taxed at your slab rate, and the bank may deduct TDS once the yearly interest from the bank crosses a threshold. The figures in the calculator are before tax. For a rate of 7% and a 30% slab, the after-tax return is closer to 4.9%. This matters when you compare an FD with an investment taxed differently, or with inflation. Estimate your tax with the Income Tax Calculator, which also shows which regime treats your income better.

Breaking a deposit early

If you close an FD early, banks usually pay the rate for the period the money actually stayed (which is lower than the original rate for a longer term), minus a penalty, often 0.5% to 1%. For an RD, stopping instalments can lead to a penalty or closure. Check your bank's terms before you commit, and do not lock up money you may need soon. A common approach is to split savings into several smaller FDs of different terms, so that you can break only one if needed, a pattern called a ladder.

FD, RD or something else?

Goal	Better fit
Money you have now, to be safe for a fixed term	FD
Regular income from a lump sum	Payout FD
Saving a part of monthly income with a rate fixed	RD
Long-term growth with higher risk	Market investments, see the SIP Calculator
A lump sum growing at a rate you choose	Compound Interest Calculator

Deposits give certainty but a modest return, and their value can be eaten by inflation. They are a good place for money you will need within a few years, such as an emergency fund or a deposit for a purchase. Within India, deposits in banks are insured up to a limit per depositor per bank; check the current limit with the bank or the deposit insurance corporation.

Common mistakes

• Comparing the headline rate without looking at the compounding or payout frequency.
• Choosing a payout FD when growth was the aim, or the reverse.
• Putting all savings into one long FD and then needing the money.
• Forgetting that interest is taxable.
• Missing RD instalments.
• Assuming an RD is the same as an FD of the total amount.

Quick answers

What is a cumulative FD? One where interest is added to the deposit and paid at maturity.

Why is an RD's interest lower than an FD's of the same total? Because each instalment is invested only from the day it is deposited.

How is the interest compounded? The calculator uses quarterly compounding, which is common for Indian banks.

Is the result before tax? Yes.

Do senior citizens get more? Often a higher rate. Enter the rate your bank offers you.