“Paisa hi Paisa Hoga” -Phir hera pheri(2006) Translation: There will be ample money! This dream exactly isn’t impossible, if you have the correct scheme in your hands. FD(Fixed Deposit) and RD(Recurring Deposit) are always a matter of confusion to the investors regarding which one is the finest deposit policy for them. From “How much they need to invest”, to “How much they will collect” at the end of the tenure, is one of the questions which every investor at least goes through once before investing. There are many profiting as well as loss-making schemes, which are being posted every day by various types of emerging banks. It’s entirely up to the investors which scheme is suitable and they wish to invest their money in. So, we are here, to clear some doubts for you.
Fixed Deposit and Recurring Deposit are two types of Termed Deposits.
Here’s a short brief on what is Fixed Deposits and Recurring Deposits.
Fixed deposits are one of the types of termed deposits, in which a certain amount or higher lump sum is deposited for a fixed interval of time. In Fixed Deposit, the investor gains interest depending on the deposited amount. FD is more popular as an investment option since it’s safer and comes with lesser risks. Various banks offer Fixed deposits. The process requires investing a sum of the amount being invested as a fixed deposit into the investor’s savings account or else they also have the option of opening a new account if they don’t have any. All the details of the FD are discussed at the time of the FD account being opened. This is better suited for people having a huge amount of money in their keepsake already.
Recurring deposits are one again, a type of termed deposits, and have a similar advantage as FD, except one i.e. the recurring cycle of investments. Unlike FD, in RD investors keep depositing a fixed amount of money every month or alternate months, for the pre-decided tenure to avail the benefits. Once Maturity is reached, they get their profits along with the original deposit. This type of investment is suited for monthly salaried and low annual income people. One of the benefits of choosing RD is people soon start saving on their own since it became a habit for them.
Now let’s discuss in detail, the differences between Fixed deposits and recurring deposits.
|Fixed Deposit||Recurring Deposit|
|Amount of Investment||People need to invest a higher lumpsum amount at a single time as a fixed deposit in any bank of their choice or financial institution.||People invest a small pre-fixed amount in the bank every month till the end of the tenure.|
|Taxation||If the interest earned is exceeding Rs. 10,000, the investor has to pay the TDS.||In RD, it is not mandatory, but the investor has to mention the interest gained at the time of reviewing ITR(Income Tax Return).|
|Tenure||In general, it’s from 7 days up to 10 years, but investors can choose the most suitable option between them.||In general, it’s from 6 months up to 10 years, but investors can choose the most suitable option between them.|
|Loan availability||The account holder can avail of a loan against the fixed deposit, even though the amount to be sanctioned may differ, such as 90% of FD only.||It is the same as FD, i.e. 90% of RD can be availed as a loan against the recurring deposit.|
|Extra benefit||Investors don’t have to worry about monthly investments, since they have already invested the amount in a lump sum.||People investing in RD develop a habit to gather savings.|
These were some major differentiating criteria between Fixed deposits and recurring deposits.
We hope now you will be able to make a clear decision which deposit is the best suited for you and will bring you larger profits as compared to the latter one.