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Difference Between FD and RD

Fixed Deposits and Recurring Deposits are two of the most famous investment options in India, particularly among risk-averse investors. The major benefit of investing in a fixed deposit program or recurring deposit plan - it is that their returns are ensured and are risk-free. However - a lot of investors are not sure if they need to invest in the RD plan or the FD scheme. 

All of the big banks and financial institutions give both RD and FD as fixed income solutions. Both of the schemes would allow you to invest a particular amount and receive a fixed interest rate on that amount. Investors would also get both the capital and the interest at the conclusion of the term.

What is the Difference Between FD and RD?

Here is a table to show the difference between fixed deposits and recurring deposits

Particulars Fixed Deposit Recurring Deposit
1) Tenure of the Deposit: Seven days - 10 years Six months - 10 years
2) Minimum Amount of Deposit for the Schemes: Rs. 100 Rs. 10
3) Deposit Frequency of the Schemes: Single Deposit Monthly deposit
4) FD vs. RD Interest Rates: 3% to 7% 3.50% to 8.50%
5) Payout of the Schemes: Monthly, quarterly, or yearly withdrawals are possible with FDs. As a result, they provide a reliable source of income. Returns from RD are only realized when the scheme reaches maturity. At the end of the investment period - the investors are entitled to a lump-sum payment.
6) Withdrawals of the Scheme: This item is not available. Depositors, on the other hand, have the option of discounting their investment and withdrawing the funds. However, there is less attention to such cases. This item is not available. Depositors, on the other hand, have the option of discounting their investment and withdrawing the funds. However, there is less attention to such cases.
7) Auto-Renewal Facility of the Scheme: The facility is available to FDs. It is not available to RD schemes.
8) Default: Investors cannot default because the entire payment is made at the start of the term. The bank or institution has the right to cancel the account if the depositors fail to make RD payments for six months in a row.
9) Taxes on the Schemes: Interest income above INR 40,000 is taxed at 10%, and senior citizen depositors are taxed at INR 50,000. If your PAN isn't submitted, you'll get a 20% discount. Interest income above INR 40,000 is taxed at 10%, and senior citizen depositors are taxed at INR 50,000. If your PAN isn't submitted, you'll get a 20% discount.
10) Tax-Saving Facility: Deposits with a 5-year lock-in duration are available. Not available to this scheme.
11) Investment Type: FDs are one-time investment choices that do not encourage depositors to make ongoing investments. RDs are monthly investment choices that require participants to invest every month for the length of the scheme. As a result, depositors will develop an investment habit.
12) Insurance Over the Deposit: FDs have insurance coverage. RDs have insurance coverage.

 

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What is the Difference Between RD and FD - Benefits of Each Scheme

Fixed Deposit

Mentioned below are the benefits of investing in a fixed deposit scheme:

  • FDs encourage investors to put aside a big sum of money for a set period of time.
  • Section 80C will allow for tax exemption on investments in tax-saving FDs.
  • FDs are a safe investment with a guaranteed return in the form of interest.
  • The tenure of FDs might range from seven days to ten years. Depending on their objectives, investors can choose any tenure.
  • The interest rates on FDs are higher than those on savings accounts. A fixed deposit calculator can be used to calculate the interest earned on an FD.
  • FDs are a type of liquid investment. Despite the fact that they have a set term, investors can withdraw their funds at any moment with a penalty.

Recurring Deposit

Mentioned below are the benefits of investing in a recurring deposit scheme:

  • The duration of RD investments spans from six months to ten years. Investors can determine the RD's tenure based on their investment objectives.
  • Small savings are encouraged by RDs. They also instill financial discipline by investing a set amount on a regular basis.
  • Section 80C exempts investments in Post Office RDs from taxation.
  • Investors could take out a loan against their RD investments, making them more liquid.
  • Investing in RDs is risk-free and provides a steady stream of income in the form of interest.
  • The interest rate on an RD is higher than the interest rate on a bank savings account. A recurring deposit calculator can be used to compute the interest earned on RDs.

Recurring Deposit Vs. Fixed Deposit - RD or FD Which is Better?

A recurring deposit (RD) appears to be the appropriate fit for persons who do not have a lump sum to invest in an FD but can afford a modest percentage of the investment amount from their monthly income. Both the RD and the FD are suitable for risk-averse investors who are largely in the lowest tax bracket. Use an online recurring deposit calculator to determine the best option for the amount you have available to invest. 

Although no single investment product may fulfill all demands, many people prefer an RD since it is cheaper and also offers nearly the same returns as an FD.

Comparison of FD rates

Name
Tenure
Highest Interest Rates
1
2
3
4
5

FAQs

Q1. Does an FD or RD have a higher interest rate?

An FD would earn interest over tenure, and RD only is the first deposit earned through the tenure. 

Q2. Are the rates for RD and FD the same?

The FD interest rate is slightly higher than the RD interest rate.

Q3. Is it better to invest in FD RD or PPF?

The tax-saving FDs have a 5-year lock-in period, which is significantly less than the PPF. However, FDs come with some risk, and the interest you earn is taxed. So, if you're okay with a 15-year lock-in, PPF could be a smart alternative after all is said and done.

Q4. Who can invest in an RD?

The investors that do not have a lump sum right away to invest can choose an RD.

Q5. Who should invest in an RD?

If you have a lump sum amount that you can lock in for a long period of time, you can choose an FD.

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