The Difference Between Fixed & Recurring Deposits

Sab chahte hain paise bachayen bhi aur badhayen bhi. Zaruri hai ye janna ke apke liye kaunsa option accha hai. A whole lot of investment options are available, but it is important to know which options suit your requirements better. Everyone wants to choose a financial instrument which offers high returns. The most commonly used secure instruments for investment are Fixed Deposit (FD) and Recurring Deposit (RD).

 

What is a recurring deposit account?

A recurring deposit account allows you to deposit a fixed amount at regular intervals (monthly) for a predetermined tenure. It promotes disciplined savings and is suitable for those with regular income.

 

Features of a recurring deposit account

• Regular fixed deposits at specified intervals
• Flexible tenure options
• Smaller monthly deposits
 

What is a fixed deposit account?

A fixed deposit account involves a one-time lump sum deposit for a specified period, earning higher interest compared to recurring deposits.

 

Features of a fixed deposit account

• Lump sum deposit for a chosen tenure
• Higher interest rates
• Flexibility in tenure selection
 

Major Differences between FD and RD:

• In RD, an investment is made at a fixed period, whereas in FD, the investment is one-time
• RD works well for people who wish to invest minimal amount monthly or at any fixed period
• The investment in FD is a higher lumpsum.
 

Their differences are discussed in further detail:

Duration:

For fixed deposits, the minimum duration is 7 days and for recurring deposit, the minimum duration is six months. The maximum duration for both schemes is 10 years.

Taxation:

Both fixed deposit and recurring deposit are taxable i.e. interest earned on both the schemes is taxable. In the case of RD, it is not mandatory to pay TDS, but the individual has to mention interest earned at the time of filing ITR (income tax return). In a fixed deposit, if the interest earned on deposit amount is more than Rs. 10,000, the account holder has to pay TDS. This limit will be revised to Rs 40,000 from April 1, 2019. The TDS is 10% if the PAN is submitted, if not, then 20% TDS is liable.

Returns:

When returns in FD or RD are compared, then FD seems to give higher returns. The reason is that in RD, the account holder deposits monthly and therefore, the interest is also earned accordingly. Usually, the FD amount is deposited once, and is a lump sum that earns a higher interest rate. AU Small Finance Bank offers monthly payout on FD as well.

The scheme which serves you better, totally depends on your requirement. In fixed deposits, the Interest earned is higher but recurring deposits are more flexible because they let you deposit in small amounts. Choose wisely, earn better!

 

Aspect	Fixed Deposit (FD)	Recurring Deposit (RD)
Investment Frequency	One-time lump sum deposit	Regular fixed deposits
Minimum Investment	Higher lump sum	Lower, in regular intervals
Duration	Flexible, from days to years	Fixed tenure, usually months/years
Interest Calculation	Lump sum earns higher interest rate	Interest calculated on monthly basis
Taxation	TDS applicable on interest over Rs. 10,000	Interest earned is taxable
Returns	Generally higher returns	Returns depend on regular deposits

 

FAQs

Who can invest in an RD?

Any individual can invest in a Recurring Deposit. It is a suitable option for those looking to save and earn interest over time.

 

Who should invest in an FD?

Fixed Deposits are ideal for individuals who have a lump sum amount to invest and are seeking higher returns over a fixed tenure.

 

Are FD and RD Interest Rates the same?

No, FD and RD interest rates may vary. Fixed Deposits generally offer higher interest rates due to the lump sum nature of the investment, while RD rates depend on regular deposits made over time.

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