Objective | To earn better returns on idle money than savings account | Vs | To induce a habit of regular saving |
Meaning | An 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 amount | Lumpsum | Vs | In instalments- usually monthly instalments |
Interest Rates | Varies from bank to bank- dependent upon tenure | Vs | Varies from bank to bank- dependent upon tenure |
Interest Rates Compounding | Quarterly | Vs | Quarterly |
Interest earning | More 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 |
Liquidity | Yes | Vs | Yes |
Tenure | 7 days to 10 years | Vs | 6 months to 10 years |
Income Tax Rebate u/s 80C | Yes upto Rs 1,50,000/- p.a., but on FD with a lock in period of 5 or more years | Vs | No |
Maturity | Taxable | Vs | Taxable |
Premature Withdrawals | Entire 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 |
Loans | Loan 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 Source | 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). | 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 income | Yes, interest can be transferred periodically to savings account | Vs | No |