The numbers
12 deposits of ₹2,000 = ₹24,000. At an example bank rate of 6.5% compounded quarterly, the maturity value is about ₹24,857, so you earn about ₹857. (Check your bank’s current rate for a 12-month RD and type it in — the calculator updates instantly.)
“Why so little interest?”
Because each instalment only stays in the account for part of the year: the first ₹2,000 earns for 12 months, the last ₹2,000 for just one. On average your money is invested for about half the period, so the interest is roughly half of what a one-year FD of ₹24,000 would earn. That is normal — not a mistake.
Different lengths at 6.5%
| Tenure | Deposited | Maturity | Interest |
|---|---|---|---|
| 6 months | ₹12,000 | ₹12,228 | ₹228 |
| 12 months | ₹24,000 | ₹24,857 | ₹857 |
| 24 months | ₹48,000 | ₹51,370 | ₹3,370 |
| 36 months | ₹72,000 | ₹79,649 | ₹7,649 |
When a short RD makes sense
- You want to build a habit: the bank auto-debits the amount on a fixed date.
- You have a fixed expense coming up in 6–12 months.
- You would otherwise leave the money in a savings account at 2.5%–3%.
If you already have the full amount, a one-year FD earns more. And the Post Office RD is only for 5 years, so short goals belong in a bank RD.
Making a small RD work harder
Pick the deposit date carefully: choose a date a day or two after your salary arrives so the auto-debit never fails. Some banks let you vary the instalment (“flexi RD”), which is handy if your income is irregular. And if you get a festival bonus, you can usually open a separate fixed deposit rather than changing the RD.
For taxes, interest from a small RD is unlikely to reach the TDS limit, but it is still taxable at your slab rate and appears in your AIS. If your total income is below the taxable limit you pay nothing. Senior citizens often get an extra 0.25%–0.75% on bank RDs; tick the box in the calculator to see the TDS limit for seniors.
Finally, give the RD a clear name in your banking app — “School fees 2027” or “Diwali fund” — it sounds small, but people who label their savings tend to leave them untouched until the goal arrives.
Key RD figures (checked 5 November 2026)
| Item | Figure |
|---|---|
| Post Office 5-year RD rate (Oct–Dec 2026) | 6.7%, compounded quarterly |
| Minimum deposit | ₹100 a month (Post Office) |
| TDS threshold per bank | ₹50,000 interest a year (₹1,00,000 seniors) |
| TDS rate | 10% with PAN, 20% without |
| Compounding formula | Σ P × (1 + r/400)^(k/3) |
FAQ
What is the maturity of ₹2,000 a month for 12 months at 6.5%?
About ₹24,857, including ₹857 of interest.
Why is RD interest lower than FD interest?
Because each instalment is invested for a shorter time; on average your money is in the account for about half the tenure.
What does ₹2,000 a month give over 3 years at 6.5%?
₹79,649.
Sources (checked 5 November 2026): Ministry of Finance (Department of Economic Affairs) small savings rates for Q3 FY 2026-27, announced 30 September 2026 (5-year RD 6.7%, reported by Studycafe and Free Press Journal); India Post Recurring Deposit Account rules (quarterly compounding, default fee, loan and premature closure); Income-tax Act TDS thresholds for interest (₹50,000 / ₹1,00,000 for senior citizens from 1 April 2025).