What is the difference between fd and rd

The returns or maturity proceeds of both the investment options are guaranteed by the bank and other such financial institutions. You can get an idea of the maturity amount based on the tenure, amount and rate of interest. This allows you to plan in advance by linking your financial goals with the FD or RD amount.

You can prepare for future expenses such as your child's education, marriage, international trip, renovating your home and more. Loan facility: You can avail a loan against fixed deposit and recurring deposit amounts, both. The withdrawal amount can be used for any purpose. The amount that can be borrowed varies from one bank to the other.

Some of the facilities offered by fixed deposits and recurring deposits are as follows:. FD and RD both can be opened by visiting the bank's branch or through the internet and mobile banking. It is recommended to have a nominee for your deposit. Or, you can even open a joint account with a family member. This ensures there is always someone to claim the maturity proceeds from your account in case of your absence.

You can open RDs and FDs in the name of your close family members including your spouse, parents and children. Thus, FDs and RDs both make for a great gifting option. For example, you can open an FD in the name of your child on their birthday. The maturity proceeds can be used for their education or other expenses when they grow up. Now that we have grasped the basics, let us understand what is the difference between FD and RD? After looking at the difference between fixed deposit and recurring deposit let us move on to analyse which of the two can help us earn more.

FD or RD? FDs and RDs can be opened at the branch, through internet or mobile banking. It is advisable to have a nominee for your deposit. You can also open a joint FD or RD along with a loved one. This will ensure that in your absence the joint holder can operate the account, that is, claim the proceeds from the account. You can open FDs and RDs in the names of your spouse, children, parents or other close family members. Hence, these make for good gifts on occasions such as birthday, wedding, etc.

Since the maturity amount is known upfront, FDs and RDs are useful tools for planning your future expenses. Pre-mature withdrawal is allowed with a penalty. Another benefit is the Loan against FD, which is useful in case of an emergency.

You have to pay income tax if the interest earned is more than Rs. The interest gets added to your income and is taxed as per your income tax slab. Banks deduct TDS if the interest exceeds Rs. For senior citizens, the TDS limit is Rs. If your total income is below the taxable limit of Rs 2. FD is a good option for those who have a lump sum amount to invest.

It is also a good option for someone looking for regular cash inflow, as you can choose monthly or quarterly pay-out. For instance, retired persons can invest benefits received at the time of retirement in a long-term FD. This will ensure the protection of their capital as well as regular interest for their monthly expenses. Meanwhile, others may have certain short-term goals in mind that they would like to achieve with a fixed budget and within a few months.

Therefore, the type of deposit account that works for you would provide you with the ideal investment tenure for your specific financial requirements. In the case of Recurring Deposit, tenures typically range from at least a year and go up to 10 years. For Fixed Deposits, however, the minimum tenure for investment is far lower. There is far more flexibility for potential investors since the tenure can be as short as 7 days and as long as 10 years for Fixed Deposits.

At the end of the day, your choice of deposit account would also depend largely on the type and amount of returns you can expect from it. After all, the purpose of investing in either a Fixed Deposit or a Recurring Deposit is to avoid accumulating idle money and instead, reap some interest on it.

One factor that determines the returns you earn would be interest rates, but these tend to be similar across the board for both of these options. However, in the case of Recurring Deposits, interests are earned on a recurring basis. So, your first instalment will earn interest for 12 months, your second instalment for 11 months and so on. However, in Fixed Deposits , you earn interest based on your entire lump sum deposit amount, which is guaranteed to be higher than that earned on deposit instalments.

Therefore, we can see that while both serve as excellent savings options, Fixed Deposits tend to edge out with greater benefits. Fixed Deposit accounts offer more flexibility with their range of tenure, provide higher returns and are ideal for anyone seeking to invest any amount of money for a given period of time. Fixed Deposit accounts are often the difference between storing idle money and reaping handsome, monetary rewards.