RD interest is calculated using quarterly compounding. Each monthly deposit earns interest for different periods. The formula considers compound interest where each deposit grows from its deposit date until maturity.

What happens if I miss an RD installment?

Missing RD installments usually attracts a penalty (typically ₹1-5 per ₹100). Some banks may convert the account to irregular RD with lower interest rates. It's important to maintain regular deposits to avoid penalties.

Can I withdraw RD before maturity?

Premature withdrawal is allowed (usually after 1 year) but with penalty. Banks typically reduce interest rate by 1% and may charge additional fees. The exact terms vary by bank and should be checked before investing.

What is the difference between RD and SIP?

RD offers guaranteed fixed returns (6-7.5%) with capital protection, while SIP in mutual funds offers potentially higher returns (10-15%) but with market risk. RD is safer but SIP may provide better inflation-adjusted returns.

Is there TDS on RD interest?

TDS at 10% is deducted on RD interest if it exceeds ₹10,000 in a financial year from a single bank. You can submit Form 15G/15H if your total income is below taxable limit to avoid TDS deduction.