How They Work
FD (Fixed Deposit): You deposit a lump sum for a fixed tenure and earn interest. Best when you have a large amount to park safely.
RD (Recurring Deposit): You deposit a fixed amount every month for a set tenure. Best for building savings discipline.
Interest Rate Comparison
FDs generally offer slightly higher interest rates than RDs at the same bank for the same tenure. This is because the bank has your full amount from day one with an FD, while an RD builds up gradually.
However, the difference is usually small — 0.1% to 0.25%.
When to Choose FD
- You have a lump sum to invest (bonus, inheritance, sale proceeds)
- You want the highest guaranteed return
- You don't need the money during the tenure
When to Choose RD
- You want to save a fixed amount monthly (like a SIP for debt)
- You don't have a lump sum but want to build savings
- You want to develop a savings habit
Tax Treatment
Both FD and RD interest is taxable under "Income from Other Sources." TDS is deducted if interest exceeds ₹40,000/year (₹50,000 for seniors). You can claim deduction under Section 80C only for 5-year tax-saving FDs.
Frequently Asked Questions
Yes, but you'll usually face a penalty of 0.5–1% on the interest rate. Check your bank's premature withdrawal terms.
SIP in equity mutual funds has historically given higher returns (10-12%) over long periods, but carries market risk. FDs offer guaranteed returns (6-7%) with zero risk.
Track FDs and RDs together
One dashboard for both. With maturity alerts.
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