Wednesday, December 6

A Comparative Difference Between Recurring Deposit and Fixed Deposit

Savings provide financial security, freedom, and protection in a financial emergency. In addition, saving money allows you to avoid debt, which reduces stress. But how to hold your savings?

A bank deposit is one of the safest investment options because it is simple to open, operate, and withdraw on maturity. Deposits are of two types: Fixed and Recurring deposits. How can you decide between FD and RD? This post discusses the two forms of deposits and the distinctions between them.

What is a Fixed Deposit?

A Fixed Deposit (FD) is a form of investment where a depositor deposits a fixed sum of money for a fixed period. Banks and non-banking financial institutions offer FDs to encourage their customers to save. You can make a fixed deposit for as little as 7-14 days and as much as ten years.

What is a Recurring Deposit?

A Recurring Deposit (RD) is a unique term deposit where a depositor deposits a fixed sum of money at regular intervals in Indian banks in return to earn reasonable returns. The deposit is generally from six months to ten years.

What is the Difference Between Fixed and Recurring Deposit?

While the interest rate and benefits for FDs and RDs are the same, some changes in terms of investment method, minimum investment amount, duration, etc.

Nature of Investment

A fixed deposit is a sum of money deposited for a set length of time, and a fixed deposit pays interest on the amount placed. On the other hand, recurring deposits require the consumer to deposit predetermined amounts at regular intervals over a long period.  


The minimum period for fixed deposits is seven days, and the minimum duration for recurring deposits is six months. However, both programs have a maximum term of ten years.


Fixed deposits and recurring deposits are both taxable, which means that the interest earned on both schemes is taxable. TDS is not necessary in the case of RD, but the individual must include interest earned when filing ITR (income tax return). In the case of a fixed deposit, if the interest generated on the deposit amount exceeds Rs. 40,000, the account holder must pay TDS. If the PAN is submitted, the TDS is 10%.


When you compare FD and RD returns, FD appears to provide higher returns. This is because, with RD, the account holder deposits monthly, so there is a proportionate calculation of interest. The FD amount is often placed once and is a lump sum that earns a higher interest rate. Eligibility

Anybody can open an FD with an active bank account, but a depositor must have an active bank account and a source of regular income to open an RD.

Minimum Amount

You can open an RD with a minimum amount of INR 500, but for FD, it varies from one bank to another.


 Although The interest gained on the best FD Schemes is higher than RDs, RDs are more flexible because they allow you to deposit small sums of money.

Interest Payment

FDs pay monthly or quarterly interest, but there is no monthly or quarterly payment option for RDs.

Auto-Renewal Option

Banks offer an auto-renewal option for FDs, and you have the option of renewing only the principal or both the principal and interest. But with RDs, you have no such offer.


Fixed-income investments, such as FDs and RDs, are both available, and they provide a guaranteed return when they reach maturity; the recurring and fixed deposit interest rates in India are fixed and do not vary over the deposit’s term. Check bank services concerning interest rates, lock-in time, and all other factors discussed above to choose the right one for you.