Difference Between FD & RD

Fixed Deposits Vs Recurring Deposits

Choosing between an FD and an RD often requires careful consideration of an individual’s financial goals. FDs involve a lump sum investment for a fixed tenure, while RDs allow for periodic investments over a predetermined period.

Here’s a table that presents the key differences between FD and RD to help you make an informed decision.

Feature	Fixed Deposit (FD)	Recurring Deposit (RD)
Investment	Lump sum amount	Fixed installments at regular intervals (monthly, quarterly)
Minimum Investment	As low as ₹1,000.	As low as ₹100
Tenure	7 days to 10 years or more	6 months to 10 years or more
Interest Rate	Ranges from 2.75% p.a. to 8.25% p.a.	Ranges from 2.50% to 8.50% p.a.
Deposit Frequency	One-time lump sum deposit	Fixed installments (usually monthly)
Maturity Amount	Principal + accumulated interest	Total deposits made + interest earned
Liquidity	Lower (may incur penalty for early withdrawal)	Lower (penalty for missed deposits or early withdrawal)
Auto-renewal	Available for automatic renewal at maturity	Not available for auto-renewal
Taxation	Applicable if interest earned in a year exceeds ₹10,000.	No TDS is deducted on interest earned.
Suitability	Individuals with a large sum to invest for a fixed period	Individuals who want to save regularly

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Fixed Deposit

A Fixed Deposit (FD) is a savings instrument offered by banks and similar financial institutions. It’s essentially a way to invest a lump sum of money for a predetermined period at a fixed interest rate. FD requires you to deposit a fixed amount upfront. This amount gets locked in for the chosen tenure (7 days to 10 years typically). You choose the term that aligns with your financial goals.

Longer tenures come with higher interest rates. The interest earned on your FD can be paid out in various ways, depending on your preference. You can choose to receive it monthly, quarterly, half-yearly, or at maturity along with the principal amount. Once the FD matures, you get back the principal amount you deposited along with the accrued interest.

Fixed Deposit (FD) Features

Fixed deposits (FDs) are a popular investment option that offers a safe and reliable way to grow your savings. While the primary appeal of FDs lies in their guaranteed returns, there are several other features that make them an attractive choice for investors seeking low-risk investment options.

The table below shows the interest rates and several other features of FD.

Recurring Deposit

A Recurring Deposit (RD) is a type of deposit account offered by banks and post offices in India. It is designed to help people save money regularly and earn interest on their savings. Similar to a fixed deposit (FD), an RD offers a fixed interest rate on your deposit. But unlike an FD, an RD allows you to deposit a fixed amount every month over a chosen tenure.

RDs come with flexible tenure options, typically ranging from 6 months to 10 years. Interest is usually compounded on a monthly or quarterly basis on the total deposit amount, including your monthly contributions and the accrued interest. Upon maturity, you receive the entire principal amount you deposited along with the accumulated interest.

Recurring Deposits are a low-risk investment option suitable for those seeking to build a corpus or save for a specific short-term goal.

Features of Recurring Deposit (RD)

RDs come with a range of features designed for the varying needs of investors. These features not only make the investment process smooth but also provide added benefits to maximize returns.

The table presented below shows the key features of Recurring Deposits.

Choose Between FD and RD

Determining the suitable choice between an FD and an RD involves considering various factors, such as the required corpus, investment tenure, liquidity requirements, and tax implications. Additionally, an individual’s life stage, income stability, and overall financial strategy play a crucial role in the decision-making process.

Consider the factors below before making a decision regarding FD and RD.

• Investment amount: If you have a lump sum, FD might be better. For smaller, regular savings, RD is suitable.
• Investment horizon: FDs are ideal for fixed timeframes to earn a predictable return. RDs are good for long-term saving goals where the money accumulates gradually.
• Liquidity needs: If you may need access to the money before maturity, RD might be a better option due to potentially lower penalties compared to FDs.
• Tax implications: Consider the tax benefits of specific FD schemes and the impact of TDS on your overall tax liability.

Steps to Open an FD Account

Fixed deposits offer a secure investment option. With the security of a government-backed or reputable financial institution, FDs are an attractive choice for risk-averse investors seeking a steady income stream. Opening a fixed deposit (FD) account is a great way to save money and earn interest.

Let’s take a look at the steps involved in opening an FD account both online and offline.

Open FD Account Offline (At Bank Branch)

• Step 1: Visit the nearest branch of the bank where you want to open the FD account.
• Step 2: Submit an account opening form along with KYC documents like identity proof, address proof, and photographs.
• Step 3: Choose the FD scheme – amount to be deposited, tenure, interest payout frequency (quarterly, yearly, or at maturity), etc.
• Step 4: Make the lump sum deposit for the FD via cash, cheque, or transfer from an existing account.
• Step 5: Provide nomination details if required.
• Step 6: Review and sign the account opening form and other documents.
• Step 7: The bank will provide you with an FD receipt containing all the important details like FD account number, principal amount, tenure, interest rate, maturity date, etc.

Open FD Account Online (Bank Website)

• Step 1: Visit the website of the bank and look for the option to open a new FD account online.
• Step 2: Fill in the online account opening form with personal details, FD scheme preferences like tenure, amount, interest payout frequency etc.
• Step 3: Upload soft copies of required KYC documents.
• Step 4: Complete the video KYC process as it is required by the bank.
• Step 5: Make the lump sum deposit for the FD online via net banking or payment gateway.
• Step 6: Review the details and submit the online form.
• Step 7: The bank will send you the FD account number and other details via email/message.
• Step 8: You may need to visit the branch for biometric verification within a specific period.

Steps to Open an RD Account

An RD account is a type of fixed deposit scheme offered by banks and post offices, where you can invest a fixed amount at regular intervals, typically monthly or quarterly.

Here are the typical steps to open a Recurring Deposit (RD) account with a bank.

Open RD Account Offline (At Bank Branch)

• Step 1: Choose a bank in which you want to open the RD account.
• Step 2: Submit an account opening form along with KYC documents like identity proof, address proof, and photographs.
• Step 3: Choose the RD scheme – monthly installment amount, tenure, etc.
• Step 4: Make the first monthly installment payment via cash/cheque.
• Step 5: Provide nomination details if required.
• Step 6: Review and sign the account opening form and other documents.
• Step 7: The bank will provide you with an account number and deposit book/passbook.

Open RD Account Online (Bank Website)

• Step 1: Visit the website of the bank and look for the option to open a new RD account online.
• Step 2: Fill in the online account opening form with personal details, and RD scheme preferences like tenure, monthly installment amount, etc.
• Step 3: Upload soft copies of required KYC documents.
• Step 4: Upload soft copies of required KYC documents.
• Step 5: Make the first monthly installment payment online via net banking or payment gateway.
• Step 6: Review the details and submit the online form.
• Step 7: The bank will send you the RD account number and other details via email/message.
• Step 8: You may need to visit the branch for biometric verification within a specific period.

FD Calculator

• Principal amount: The amount you deposit in the FD.
• Interest rate: The rate offered by the bank or NBFC on your FD.
• Investment tenure: The period for which you invest your money.
• Frequency of interest: Whether the interest is compounded annually, quarterly, monthly, etc.

Using an FD calculator is straightforward. You typically enter the details mentioned above, and the calculator provides an estimate of the maturity amount you’ll get at the end of the tenure. This helps you:

• Plan your investments: See how much your FD will grow over time, allowing you to plan for future expenses.
• Compare FDs: Enter details for different FDs and compare the maturity amounts to pick the one that best suits your needs.

RD Calculator

Here’s what an RD calculator typically considers:

• Monthly deposit amount: The fixed sum you contribute every month throughout the RD tenure.
• Interest rate: The rate offered by the bank on your RD.
• Tenure: The total period of your RD investment, in months or years.
• Compounding frequency: How often the interest is compounded on your deposit – monthly, quarterly, or annually.

Please Note

• RD calculator results are estimates. The actual maturity amount might differ slightly due to factors like bank rounding or specific RD scheme terms.
• TDS (Tax Deducted at Source) may apply to interest earned on RDs, but most RD calculators typically don’t account for this. So, the final maturity amount might be slightly lower.