From the times where our grandmothers used to set aside an amount from their daily expenses to recently where individuals are opting for several investment schemes, savings have remained an integral part of our financial planning.
There are multiple investment options available in the market today, each offering attractive benefits to potential customers. One of these instruments is Recurring deposit. RDs aid in the savings plans of the individuals by allowing them to save bit by bit and earn guaranteed returns on the outstanding amount.
The Recurring Deposit Calculator
Many banks provide the feature of an online recurring deposit calculator. This calculator helps you in computing the interest and the maturity amount the depositor would earn from his recurring deposit account. One must remember that the returns from a recurring deposit are taxable and a majority of the banks levy around 2% on the premature withdrawal of a recurring deposit account.
This, in turn, results in most of the depositors making around 3.5% to 5% as returns on their deposits. Given these conditions about an RD, it becomes imperative for the depositors to use the recurring deposit calculator to determine the interest and amount they would earn out of their savings.
How to use the recurring deposit calculator
Using an online calculator is not only very easy but also saves a lot of the time of the investors. The output from this calculator is accurate which gives the investors clarity on their funds and in turn, helps in financial management. Using a calculator also helps in comparing several RDs from different banks and financial institutions.
Here is a quick guide on how to use the RD calculator:
- Enter the amount that will be deposited in your RD account each month
- Enter the tenure of the investment
- Enter the rate of interest on the deposit using the slider available
The calculator gives the initial deposit, maturity amount, and wealth gained.
How is the recurring deposit calculator helpful
Since recurring deposits are continuing investments, the investors might find it complicated to calculate the returns on these deposits. There are numerous variables involved in the computation which makes it even more complex.
The Recurring deposit calculator makes this computation hassle-free and provides the investor with the exact value that their savings will accumulate after the tenure. All the investor needs to do is compute the TDS as it varies from institution to institution.
Here are a few advantages of a recurring deposit calculator:
- It enables investors in their financial planning with exact amounts of interest and maturity value
- Since the computation involves several variables, using a calculator for the purpose saves time of the investor
- It provides accurate figures which help in prudent planning
Factors affecting the rates of interest
The computation of interest rates on recurring deposits is done quarterly and these rates vary depending on numerous factors. The rate of fo interest is slightly higher for senior citizens than the regular RDs. Apart from that, here is a list of factors that affect the rate of interest of a recurring deposit account:
- RBI policies
- State of the economy
- Applicant’s age
- Issuer’s rating
Features of a Recurring Deposit Account
Here are some fundamental features of a Recurring Deposit Account which make it a rather safe and convenient investment option in India:
- It inculcates a habit of savings
- The minimum amount to start an RD varies from bank to bank with the minimum amount being Rs. 10
- The tenure of an RD account ranges from t6 months to 10 years
- The interest rate offered by RDs is higher than that offered by savings bank accounts
- Generally, banks do not allow premature withdrawal. In case, they do allow premature withdrawal, they charge a fee
- RDs can be used as collaterals to get a loan equal to 80 to 90% of the deposit
- It can be regulated by directing the banks to credit amount from the saving account to the recurring deposit account
6 Advantages of Recurring Deposits in India
Here are a few benefits of investing in a recurring deposit account:
- Guaranteed deposits: Recurring deposits are one of the most preferred options among investors who are risk average and want to invest in an instrument that provides guaranteed returns
- Easy to understand: Recurring deposits are simple to understand and thus are a favorite among new investors. This type of savings instrument helps in inculcating a habit of regular savings
- The flexibility of tenure: RDs have several options such as short-term, medium-term, and long-term with respect to tenure. Starting from 6 months, this tenure can be as much as 10 years
- Low minimum amount: The minimum deposit required by banks for an RD ranges from Rs. 100 to Rs. 1000. This feature makes it a convenient savings measure
- High liquidity: RDs are highly liquid investments that can be withdrawn whenever required. However, banks levy a small premature withdrawal penalty for the same
- Collaterals for loans: RD holders can avail a loan up to 80 to 90% of their deposit by keeping their RDs as collaterals