Difference Between Fixed and Recurring Deposit

Difference Between Fixed and Recurring Deposit

Fixed deposit and recurring deposit are popular investment options for individuals looking to grow their savings securely. Gaining an understanding of these differences will enable you to make an educated choice when selecting the investment approach that best fits your financial goals..

Basics of Fixed and Recurring Deposit

Let's start by defining these two types of fixed deposit and recurring deposit

  • Fixed Deposit : A fixed deposit is a lump-sum investment made for a specific tenure at a fixed interest rate. The interest is generally compounded quarterly or annually, and you cannot withdraw the money before the maturity date without incurring penalties.
  • Recurring Deposit: A recurring deposit is a systematic savings plan where you deposit a fixed amount at regular intervals, usually monthly. RDs also offer a fixed interest rate, but they allow for more flexibility in terms of monthly contributions and withdrawal options.
Tenure and Lock-In Period

One of the primary difference between FDs and RDs is the tenure and lock-in period:

Benefits of Fixed Deposit and Recurring Deposit

Investors often consider fixed deposits (FDs) and recurring deposits (RDs) as investment options that offer multiple benefits. Here are the key advantages of each

Benefits of Fixed Deposit:
Benefits of Recurring Deposit:
Interest rates

Interest rates play a huge role in the growth of your savings. Here's how FDs and RDs differ in this aspect

Liquidity and Premature Withdrawal

The ability to access your funds when needed is a crucial factor in choosing between FDs and RDs:

Tax Implications

Taxation is another essential consideration when comparing FDs and RDs:

  1. Fixed Deposit : The interest earned on FDs is full taxable as per your income tax slab. This implies that you will be required to fulfill tax obligations on the accrued interest, thereby potentially affecting your overall investment gains.
  2. Recurring Deposit: Similar to FDs, the interest earned on RDs is also taxable. However, Tax Deducted at Source (TDS) is applicable only if the interest exceeds a certain threshold. RDs offer some tax benefits for individuals in lower tax brackets.
  3. In summary, fixed deposit and recurring deposit are both valuable investment options. Your decision should be based on your financial objectives, risk tolerance, and liquidity requirements.

    Ultimately, the right choice depends on your individual financial circumstances and objectives. It's advisable to consult with Moneyedge to determine which option really aligns the best with your goals and risk profile.

    Frequently Asked Questions

    There is no maximum amount that can be invested in an FD account; nonetheless, it may differ from one bank to the next. Depositors who invest more than Rs. 1 crore in a fixed deposit can receive customized interest rates from their bank.

    Most banks require a Recurring Deposit to be held for at least six months. Depending on the depositor, these deposits can be opened for 6 months to 10 years. Once the tenure and RD amount are set, they cannot be changed until the deposit maturity.


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