Fixed Deposit (FD) and Recurring Deposit (RD) is the most widespread investment schemes. This article will help you understand how fixed Deposit (FD) and Recurring Deposit (RD) differ from each other for your betterment.
What is Fixed Deposit (FD)
Fixed Deposit is an investment option to save money at a fixed interest rate and a fixed amount of time. Once the investment time is over, the investor will get the sum assured along with the accumulated interest.
What is Recurring Deposit (RD)
Recurring Deposit is a special type of deposit account which enables a depositor to make a regular investment every month for a fixed amount easier. The investment helps you earn interest at maturity.
Fixed Deposit vs Recurring Deposit: FD vs RD
Features |
Recurring Deposit (RD) |
Fixed Deposit (FD) |
| Sum Invested |
There is no fixed maximum or minimum limit, it depends on the bank. In few banks, the monthly minimum investment limit is ₹1,000 and the maximum is ₹15 lacs. | No limit on the amount that can be invested.The amount depends on the bank and the minimum investment is ₹100 |
| Objective | To save money. One can start investing in RD with the small amount of money on monthly basis. | To regulate money towards investment and merit a higher rate of interest than regular savings bank accounts |
| Eligibility | All residents of India and Hindu Undivided Families (HUFs) are eligible to open this account. RD accounts can also be opened for minors by their parents or legal guardians | All residents of India and Hindu Undivided Families (HUFs) are eligible to open a fixed deposit account. |
| Investment | Regularly | One-time |
| Income Tax |
RD does not offer any tax benefit. No Tax Deducted at Source (TDS), but the earned interest is taxable | Tax Deducted at Source (TDS) is subtracted on fixed deposit if interest amount exceeds ₹10,000 |
| Tenure (Duration) |
Accounts can be initiated for a minimum of 6 months, and a maximum of 10 years. | Tenure diversifies from 7 days to 15 years and investors may pick any satisfactory tenure |
| Investment Limit |
The maximum limit you can deposit is ₹15 lacs/month. The minimum limit is ₹10 | The maximum limit you can deposit is ₹1.5 Lacs. There is no minimum limit, although some banks offer a minimum deposit of ₹500 |
| Investment Amount | You need to deposit a fixed amount at regular periods every month. | You can deposit a lump sum of money and keep gaining interest on it. |
FD Calculator vs RD Calculator
Fixed Deposit (FD) Calculator helps you find out how much interest you can earn and the value of your investment (Principal) on Maturity.
Recurring Deposit (RD) Calculator helps you calculate interest rate and the maturity value of your recurring deposit account. The RD calculator will give you total savings for the estimated interest rate.
FD vs RD Interest Rates
Fixed Deposit (FD) Interest Rates: In the illustration of FD, it is started with an initial lump sum which profits interest in a compounding manner on the whole deposited amount. For a 1-year period, the interest varies between 6% and 7%. This depends on the Principal amount and Tenure the depositor opted for.
Recurring Deposit (RD) Interest Rates: In the illustration of RD, the first installment earns a 12-month interest, the second gains interest for 11 months, the third installment gets interested for 10 months, and so on, until the end of the tenure. The interest usually depends on the monthly investment amount and tenure. The interest is usually from 8%-8.5% per year.
It all depends on your needs.There is a vast selection of investment options out there, with many methods to increase your savings. Fixed deposits and recurring deposits are two of the best ways to invest and gain interests. Recurring Deposits are an ideal investment option for those who do not have a lump sum of money to invest.