Difference Between FD and RD

difference bwteen fd and rd

Are you puzzled about the difference between the FD and RD? Are you not able to understand which will be more beneficial for the long term? Don’t worry! This article will be a comprehensive guide on the difference between the FD and RD. 

And till the end of this, you will be able to understand the fundamental similarities and differences between the fixed deposit and the Recurring deposit. Let’s start from the beginning and understand what the FD and RD are?

What are FD and RD?

What is FD?

FD or Fixed Deposit is an economical support tool that is provided by banks that gives higher returns than a usual savings account. If you invest for a certain fixed period.

What is RD?

RD or Recurring Deposit is a uniform investment plan where you invest a certain amount on a regular interval and earn interest from the banks. 

FD and RD are the types of investment in the bank where you invest money for a specific tenure up to ten years to get some decent amount in return. Let’s look at some of the basic differences and similarities between fixed deposits and recurring deposits.

Differences between Recurring Deposit and Fixed Deposit

There are many differences between the fixed deposit and the recurring deposit in terms of purpose, investment tenure, and returns.

Parameter FD RD
Way to Invest You invest a heavy amount at once for a fixed time You invest any amount as a recurring. (you need to deposit every month)
Time You can deposit for 7days-10 years You deposit a certain amount for at least 6 months to 10 years
Investment  Minimum RS. 5000 Minimum RS. 500
Return  Higher returns Comparatively to FD Comparatively low returns

Recurring Deposit

In a recurring deposit, you can invest a fixed amount on a monthly basis as a recurring deposit. The tenure may be from six months to a maximum of ten years. Also, in the recurring deposit, you can deposit a minimum amount of even 500 INR per month. 

This type of investment is more convenient for those who are generating a recurring source of income. This means, if you are doing any job and you want to save some money, you can cut at least 500 INR per month and deposit in the RD.

In the case of a recurring deposit, there is no option available to get monthly or quarterly interest. Instead, you will get your amount with interest when the tenure is completed. 

Fixed Deposit

On the other hand, the minimum limit to deposit as a Fixed Deposit is 5000 INR. It is not every month. Instead, you deposit a fixed amount at once for the fixed period. The tenure can be from seven days to 10 years. 

This type of investment will be more suitable for people generating an adequate amount of money. They can easily deposit any heavy amount in lakhs or crores to get a lump sum double after ten years.

In the case of a fixed deposit, you can get interest on a monthly or quarterly basis. So, if you want to generate a regular monthly or quarterly income, you can deposit some amount in the bank. And the bank will provide you with a fixed income as interest every month.

Once the tenure is reached, then your money will be more or less doubled, and you will have the option to wave around the money again in the same manner for the next upcoming tenures. Or, you can withdraw it too.

Similarities Between FD and RD

Despite many differences, there are also some similarities too between the fixed deposit and recurring deposit in terms of tax payment to the government, their maximum tenure, and the interest rates.

  • Taxation: FD and RD are both counted in your total income. And you have to pay tax as per the usual tax slab. Suppose your income through its interest rate falls under the 30% income tax slab; you will have to pay 30% on both types of deposits as a tax.
  • Maximum Investment Tenure: FD and RD are similar in terms of their maximum investment tenure. Like you can invest in both FD and RD for a maximum of 10 years.
  • Interest rates: The interest rates for both FD and RD remain the same throughout its investment tenure. It does not change in between its tenure. Suppose if you invested 5000 rupees today in FD or RD with an interest rate of 7%. Then, the interest rate will be the same for its whole tenure. The bank is not going to make changes in terms of its interest rate.

To Sum Up

Conclusively, both types of deposit (FD and RD) have their significance, advantage, and profit at their level. But, the notable thing is which type of investment you are comfortable investing.


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