Fixed Deposit Vs Recurring Deposit

Whenever we think for making an investment of our idle savings kept in our bank account, we try to find out the best alternatives that are available for investments. For a risk-averse person, deposit with bank could be a preferred option because of involvement of very less risk with decent returns.

In such a case, there are two good fixed income avenues available with bank which are Bank Fixed Deposit (FD) and Bank Recurring Deposit (RD).

Bank FD is an account in which the investor needs to make a lump sum investment for a fixed tenure and on this invested amount, banks offer you to get a fixed interest periodically till the end of the term or you may directly get whole interest along with the principal at the time of maturity.

Bank RD is an account in which the investor needs to deposit the pre-specified amount at periodic intervals (usually in monthly instalments) for a long term.

There are many differences between FD and RD as listed in the following table which would help you choosing between the two:

Difference between Fixed Deposit and Recurring Deposit

Basis of DifferenceBank Fixed Deposit (FD) Bank Recurring Deposit (RD)
ObjectiveTo earn better returns on idle money
than savings account
Vs
To induce a habit of regular saving
MeaningAn account in which the investor needs
to make a lump sum investment for a
fixed tenure
Vs
An account in which the investor needs
to deposit the pre-specified amount at
periodical intervals for a long term
Investible amountLumpsum
Vs
In instalments- usually monthly
instalments
Interest RatesVaries from bank to bank- dependent upon
tenure
Vs
Varies from bank to bank- dependent upon
tenure
Interest Rates
Compounding
Quarterly
Vs
Quarterly
Interest earningMore than RD- As lumpsum amount is
invested
Vs
Less than FD- As amount is invested in
small instalments periodically
Interest earned is
taxable
Yes, as per investor's income tax slab
Vs
Yes, as per investor's income tax slab
LiquidityYes
Vs
Yes
Tenure7 days to 10 years
Vs
6 months to 10 years
Income Tax Rebate u/s 80CYes upto Rs 1,50,000/- p.a., but on FD
with a lock in period of 5 or more years
Vs
No
MaturityTaxable
Vs
Taxable
Premature WithdrawalsEntire amount, anytime but after
charging a certain penalty. Withdrawals
are permitted for a minimum of 5 years
under tax-saving fixed deposits.
Vs
Entire amount, anytime but after
charging a certain penalty , banks
generally charge 1% as penalty. Partial
withdrawals are not allowed
LoansLoan facility available upto 90% of the
amount in the FD and the interest rate
to such loan is around 0.5% to 2% higher
than the fixed deposit rate
Vs
Loan facility available upto 90% of the
deposit value in the RD where the RD
needs to be pledged as collateral and
the interest rate to such loan is around
0.5% to 2% higher than the fixed deposit
rate
Tax Deduction at SourceYes, at the rate of 10% on interest
earned, if it exceeds Rs. 10,000 in one
financial year. To avoid TDS, investor
can submit Form 15G (for age below 60)/
Form 15H (for age above 60).
Vs
Yes, at the rate of 10% on interest
earned, if it exceeds Rs. 10,000 in one
financial year. To avoid TDS, investor
can submit Form 15G (for age below 60)/
Form 15H (for age above 60).
Periodic incomeYes, interest can be transferred
periodically to savings account
Vs
No

Upcoming Bank Holidays

2017 February 24 is a bank holiday in Chandigarh due to Mahashivratri.
2017 February 27 is a bank holiday in Sikkim due to Losar.
2017 March 03 is a bank holiday in Mizoram due to Chapchar Kut.
2017 March 12 is a bank holiday in Jammu And Kashmir due to Holi (Jammu Province Only).

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