Each monthly deposit in an RD earns compound interest from the day it is made until the RD matures. Since deposits are made at different times, each one compounds for a different duration — the first deposit earns interest for the full tenure while the last earns the least.

Most Indian banks compound RD interest quarterly, though some may use monthly compounding. A higher compounding frequency results in a marginally higher maturity amount for the same nominal interest rate.

RD tenures typically range from 6 months to 10 years, in multiples of 3 months. Interest rates usually vary by tenure, so it is worth comparing rates across different durations before locking in your RD.

Yes, interest earned on an RD is fully taxable as per your income tax slab, similar to fixed deposit interest. Banks deduct TDS if the total interest across your RDs and FDs with that bank exceeds ₹40,000 (₹50,000 for senior citizens) in a financial year.

Most banks charge a small penalty (typically a percentage of the missed installment) for late or missed RD payments. Repeated defaults can, in some cases, lead to premature closure of the account, so it's best to set up an auto-debit for your RD contributions.