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Recurring deposits (RDs) are a type of investment that resembles fixed deposits. In contrast to a lump sum payment in an FD, you must make specified monthly contributions in RDs. Earning people develop a habit of investing on a regular basis thanks to RDs. Savings discipline is also instilled as a result of these. The majority of banks and financial organisations provide recurring deposits.
The computation of RD returns can be fairly difficult for the average investor to get right every time. An RD calculator can be really useful in this situation.
As the name implies, a recurring deposit is a long-term investment. Investors may find it difficult to follow the returns on these deposits. The interest is compounded quarterly, and the calculations are multipart due to the multiple factors involved.
An RD deposit calculator takes the guesswork out of calculating returns and allows investors to know exactly how much their deposits will grow after the relevant term.
The TDS deduction is the only thing that the investor must complete manually. According to new RBI guidelines, RDs are also subject to TDS deduction; however, there is no standardisation in how it is applied across financial institutions, which is why RD calculators ignore it.
The formula for RD maturity is as follows:
A = P*(1+R/N)^(Nt)
The variables in this equation represent-
A Maturity Amount
P RD Instalment each month
N Compounding Frequency (no. of quarters)
R RD interest rate in percentage
T Tenure
For example
An individual opens an RD account with a monthly investment of Rs. 5000 for a period of one year, or four quarters. This account earns an annual interest rate of 8%. The following formula is used to compute the final maturity amount on this deposit:
A = P*(1+R/N)(Nt) = 5000*(1+.0825/4)(4*12/12) = 5425.44 = 5000*(1+.0825/4)(4*11/12) = 5388.64… = 5000*(1+.0825/4)(4*1/12) = 5034.14 = 5000*(1+.0825/4)(4*1/12) = 5034.14 = 5000*(
Total maturity value is calculated by adding the sum of the series, i.e. A = Rs 62,730.85
Solving this problem by hand is a difficult task. In contrast, a recurring deposit calculator will supply you with the precise amount in seconds.
The depositor’s investment in RD has a maturity value of INR Rs 62,730.
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