7 tips to use rd calculator the right way

7 Tips to use RD Calculator Right Way

A recurring deposit (RD) allows you to invest small amounts regularly over a specific period of time. And at the end of the maturity period, you get your entire principal contribution back along with the interest accumulated on it. If you’re someone who is planning on investing in an RD, then it is absolutely crucial for you to use an RD interest calculator. Here are 7 tips that you should follow to ensure that you use an RD calculator the right way. 

 

1. Understand the purpose of the RD interest calculator 

Before you go ahead and use an RD calculator, it is important for you to first understand the purpose of such a tool. Such a calculator is designed to allow you to quickly determine the interest component and the maturity amount that you’re likely to get from an RD. By using the tool, you can plan your investments in a much better and a more informed manner. 

 

2. Understand how the maturity amount is calculated in an RD

Unlike a fixed deposit, the maturity amount in an RD is calculated differently. To put it simply, the interest on an RD is compounded quarterly and keeps getting accumulated till you reach maturity. At this point, the accumulated interest amount along with your principal contributions are paid out to you. 

 

3. Find out what the current recurring deposit interest rates are 

The interest rates on an RD are primarily dependent on the age of the investor. In the case of non-senior citizens, the recurring deposit interest rates tend to be lower. On the contrary, for senior citizens, banks and other financial institutions tend to offer a slightly higher rate of interest. And so, it is important to first find out the interest rate applicable to you so that you may enter the correct value when attempting to use the RD interest calculator.  

 

4. Be aware of the minimum and maximum tenures 

Many banks and financial institutions set a minimum and maximum tenure for RDs. These tend to vary from one entity to another. So, to ensure that you use the RD calculator the right way, it is crucial for you to find out what the minimum and maximum tenure for the recurring deposit is. 

 

5. Get to know what the minimum monthly contribution is 

Just like how the tenures tend to be different for each financial institution, the minimum monthly investment also varies from one entity to another. To ensure that the RD interest calculator displays results that are relevant to you, you would need to first ascertain the minimum monthly investment that you need to make towards the recurring deposit. 

 

6. Keep TDS in mind 

A recurring deposit calculator doesn’t account for Tax Deducted at Source (TDS). Every financial institution will automatically deduct tax from your RD interest if the total amount of interest that you’re likely to receive in a financial year exceeds Rs. 40,000. If you’re someone whose RD interest component exceeds Rs. 40,000 in a year, then you will need to account for TDS since it can reduce the amount that you receive on maturity. 

 

7. Double check the entered values 

And finally, the best way to ensure that you use an RD interest calculator the right way is by double checking all the values entered by you. This way, you can easily spot mistakes or errors, which can end up skewing your results.

 

Conclusion  

Since the interest rate on an RD is liable to change periodically, always ensure to check the current recurring deposit interest rates applicable to you before you go ahead and invest in one. 

 

Alternatively, if you wish to invest in an alternative investment option, you can look towards the stock market. However, to invest in stocks of companies, you would need an active demat account. If you don’t have one, simply contact Motilal Oswal right away to open a demat account online

Related Articles: How to Open a Demat Account Without a Broker | Factors to Keep in Mind While Opening a Demat account | Factors to Consider When Opening a Demat Account | 10 Points to Remember When Operating your Demat Account | Types Of Demat Account & Trading Account

 

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