Fixed Deposits (FD) and Recurring Deposits (RD) are popular investment options. Here's a detailed comparison to help you choose.
What is Fixed Deposit (FD)?
FD is a lump sum investment for a fixed tenure at a predetermined interest rate. You invest a large amount once and get principal + interest at maturity.
What is Recurring Deposit (RD)?
RD allows you to invest a fixed amount every month for a fixed tenure. Ideal for salaried individuals who want to build a corpus gradually.
Key Differences: FD vs RD
| Parameter | Fixed Deposit (FD) | Recurring Deposit (RD) |
|---|---|---|
| Investment Type | Lump sum (one-time) | Monthly installments |
| Minimum Amount | ₹1,000 (usually) | ₹100-500 per month |
| Interest Rate | Higher (senior citizen extra) | Slightly lower than FD |
| Tenure | 7 days to 10 years | 6 months to 10 years |
| Best for | Those with lump sum amount | Regular savers, salaried |
| Tax on Interest | Taxable (TDS if >₹40,000) | Taxable (similar to FD) |
| Premature Withdrawal | Allowed (penalty applies) | Allowed (penalty applies) |
| Loan Against | Yes (up to 90-95%) | Yes (after certain period) |
Return Comparison (Example)
FD Example:
- Investment: ₹1,20,000 (lump sum)
- Tenure: 5 years
- Interest Rate: 7% p.a.
- Maturity Amount: ₹1,69,000
- Interest Earned: ₹49,000
RD Example:
- Monthly Investment: ₹2,000 (₹1,20,000 total over 5 years)
- Tenure: 5 years (60 months)
- Interest Rate: 6.5% p.a.
- Maturity Amount: ₹1,42,000
- Interest Earned: ₹22,000
📊 Note: FD gives higher returns because entire amount earns interest from day 1, while RD earns monthly on accumulated amount.
Calculate Your Returns
Use our FD and RD calculators to compare exact returns.
When to Choose FD?
- You have a lump sum amount (bonus, inheritance, maturity)
- You want higher returns
- You don't need regular income
- You're a senior citizen (get extra 0.5% interest)
When to Choose RD?
- You have regular monthly income
- You want to build savings discipline
- You don't have large lump sum
- You're planning for a goal (vacation, down payment)
Tax Implications
- Interest from both FD and RD is taxable under "Income from Other Sources"
- TDS deducted if interest > ₹40,000 (₹50,000 for senior citizens)
- Submit Form 15G/15H to avoid TDS if income below taxable limit
- Tax-saving FD has 5-year lock-in under Section 80C
Cumulative vs Non-Cumulative FD
- Cumulative: Interest compounded and paid at maturity (higher returns)
- Non-Cumulative: Interest paid monthly/quarterly (regular income)
FAQs
Q: Which gives higher returns - FD or RD?
A: FD generally gives higher returns because the entire amount earns interest from day one.
Q: Can I break FD or RD before maturity?
A: Yes, but penalty (usually 0.5-1%) applies. Interest rate may also be reduced.
Q: Is FD or RD better for tax saving?
A: Only tax-saving FD (5-year lock-in) qualifies for 80C deduction. RD doesn't offer tax saving.
Q: Which is safer - FD or RD?
A: Both are equally safe as they are offered by banks and covered by DICGC up to ₹5 lakh.
Q: Can I have both FD and RD?
A: Yes! Many investors use both - FD for lump sum, RD for monthly savings.