Calculate the maturity value of a monthly recurring deposit.
A recurring deposit takes a fixed monthly instalment for a set term at a stated rate, with interest typically compounded quarterly. It looks like a fixed deposit paid in instalments, and the rates are usually similar, but the return on the total amount deposited is noticeably lower. That is not a worse rate — it is a shorter average holding period.
The reason is simple once stated. In a twelve-month RD, your first instalment earns for twelve months but your last earns for barely one. On average, your money is invested for roughly half the term, so the total interest is around half what the same total lump sum in an FD would have earned over the full period. Neither product is better in the abstract: an RD suits money you do not yet have and builds the discipline of saving from monthly income, while an FD suits a lump sum you already hold. Tax treatment is identical — interest is taxable at your slab rate as it accrues, with TDS above the threshold.
Because each instalment is invested for a different length of time. Your first deposit earns for the full term and your last for barely a month, so the average holding period is roughly half the term and the interest is correspondingly lower.
It depends on what you have. An FD suits a lump sum you already hold; an RD suits saving out of monthly income. Comparing their headline rates is fair, but comparing total returns without accounting for the different holding periods is not.
Yes, at your slab rate as it accrues, exactly like an FD. TDS applies once interest crosses the threshold, and TDS is not the final liability if your slab rate is higher.
Most banks charge a small penalty for each missed instalment and may close the account after repeated defaults. The maturity value is recalculated on what was actually deposited, so it falls short of the original projection.