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Fixed Deposit vs Recurring Deposit (FD vs RD)

FD vs RD


Nowadays, investing money has become complicated and confusing. With so many options around, people are confused to find the right mode of investment. Two of the safe bets to invest are the fixed deposit and the recurring deposit. These two ensures your money invested is safe without risking it. This also gives a scope of earning interest based on the deposit amount.
Now the question is which one is better to invest: Recurring deposit or Fixed Deposit?
 FD vs RD Features:
Both these deposits are done through the banks only. Banks pay you a fixed interest on the deposited amount. This interest can be paid either infrequent intervals or all together at the end of the maturity period. The rate of interest does not change throughout the maturity period. The rate of interest prevailing at the time of the deposit will be incurred till the end date.

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The taxability is the same for both the products. But there is a difference in the tax deduction. For a fixed deposit, the bank deducts TDS if the interest income exceeds Rs.10000 in a year. However, there is no tax deduction for the recurring deposit. Recurring deposit is preferred by the investors over the fixed deposit for the taxability reason.
Tenure: For fixed deposit, the tenure ranges from 7 days to 10 years. For Recurring Deposit, the tenure ranges from 1 year to 10 years.

Deposit amount:

In fixed deposit, you have to deposit a lump sum amount for a fixed period of time. In recurring deposit, you will have to deposit a fixed amount at regular intervals till the maturity period.
The rate of interest: In a fixed deposit, the interest rate varies between 6.9% to 8%. In recurring deposit, the interest rate varies between 5.25% to 7.9%. The interest rate is a little higher in fixed deposit scheme.
Income interest: In fixed deposit, interest earned on the fixed deposit is taxable and the TDS is deducted. In recurring deposit, interest earned is taxable and most of the banks do not have TDS facility.
Loan: In fixed deposit, you can avail a loan against your investment. But this is not the case with the recurring deposit. There is no option to avail any loan.

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From where do you earn more?

If you compare both the deposits, a fixed deposit gives you more income than the recurring deposit. The interest rate is higher than the recurring deposit interest rate. Even if the interest rate is the same, the fixed deposit gives you more income. The reason is that in the fixed deposit you invest a lump-sum amount. Hence, the entire money earns interest for the complete one year.

While in recurring deposit, the first installment earns interest for the 12 months, the second installment for 11 months so on and so forth. Due to this, fixed deposit fetches higher maturity.
Recurring deposit is better if you are a salaried employee and do not have a lump sum amount to invest. Recurring deposit will help you to save smaller amount at regular intervals.

FD vs RD, FD vs RD

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