Difference Between Fixed Deposit And Recurring Deposit:

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Fixed and recurring deposits are the two most popular investment options in the country, which best suit investors who don’t want to take risks. The significant advantage of both these investments is that both offers fixed returns and involve no risk as they don’t depend on the market changes for their returns.

Most financial providers available in the country offer both fixed and recurring deposit products to their customers. With both investment types, you will invest a particular amount periodically or fully. It will grow at a fixed interest rate over a tenure. You will get the invested amount at the tenure end and the interest it gained through the tenure. 

Significant Difference Between FD & RD:

When you want better to understand the fixed deposit and recurring deposit investment, you should know about their differences. First, both the investments run over a fixed tenure. However, the fixed deposit investors can deposit an amount at once. In comparison, recurring deposit investors must deposit a fixed sum at regular intervals.

Fixed Deposit:

A fixed deposit is an investment where you will invest a lump sum together for a fixed tenure and interest rate. The interest rate for a fixed deposit will depend upon the financial provider, tenure and the amount you choose to invest. The tenure for a fixed deposit investment starts from seven days to ten years that you can choose upon your requirements. 

You can make use of the online fixed deposit calculator for calculating the interest before opening a fixed deposit investment. Fixed deposit investment is of two types: cumulative and non-cumulative fixed deposit. With a cumulative fixed deposit, you will get the investment amount and the interest together at maturity. 

When you choose to invest in a non-cumulative fixed deposit, you will get an option to choose the interest payout. The interest payout options available are monthly, bi-monthly, quarterly, half-yearly and annually. 

Recurring Deposit:

A recurring deposit is an investment where you will invest a fixed amount each month for a fixed tenure and interest rate. The investment amount will be the same throughout the tenure. You will get the invested amount and the interest it gains over the tenure at its maturity. 

The recurring deposit tenure will range from one year to ten years, which you can choose depending upon your financial goals. The interest rate for a recurring deposit investment will be the same throughout the tenure.

Fixed Deposit Vs Recurring Deposit:

When you want to understand fixed and recurring deposits better, you should understand the difference between them. Here is a tabulation that will tell you the difference between fixed deposit and recurring deposit investment:

FeaturesFixed DepositRecurring Deposit
TenureThe fixed deposit tenure ranges from seven days to ten years. You can select it depending upon your financial requirement and stability. A recurring deposit tenure ranges from one year to ten years. You can choose the recurring deposit tenure depending upon whether you have short, medium and long term goals.
Investment LimitWhen you contemplate investing in a fixed deposit investment, you will have a minimum deposit limit of as low as Rs.100 with no maximum limit. You can make the amount depending upon your financial requirement and stability.When you want to invest in a recurring deposit investment, your minimum investment amount can be as little as Rs.1000 with no maximum limit. Depending upon your financial goals and requirements, you can choose the amount you require.
Interest RateThe interest rate will range from 6.96% to 8.50% when you invest in a fixed deposit, depending on the financial provider and your chosen tenure. Generally, fixed deposit investment will have a higher interest rate than that recurring deposit investments. When you want to invest in a recurring deposit investment, the interest rate will range from 5.95% to 8.00%, which will vary depending upon the financial provider, investment amount and tenure you choose. 
Additional interest percentage for Senior CitizensWhen you are a senior citizen looking for a fixed deposit investment, you will get an additional 0.25% to 0.75% of interest gain depending upon your chosen finance provider. When you are a senior citizen looking for a recurring deposit, you will get an additional interest increase of 0.25% to 0.50%, depending upon your investment choice.
Tax BenefitsYou can attain a tax exemption of up to Rs.1.5 lakhs per year under Section 80C for your fixed deposit investment.You can attain a tax exemption of up to Rs.1.5 lakhs per annum for a recurring deposit investment.
Tax deductionWhen your fixed deposit interest per annum is lesser than Rs.50,000, you don’t have to pay tax.For your recurring deposit interest of up to Rs.50,000, you don’t have to pay tax. 
Documents requiredWhen you want to apply for a fixed deposit investment, you should submit ID proof, address proof and PAN card details.ID proof, address proof and PAN card are the documents needed when you apply for a recurring deposit investment.
Interest IncomeThe interest income you earn from your fixed deposit investment will come under taxable income. However, your financial provider will deduct TDS for the same.The recurring deposit interest income is also taxable and but your financial provider will not deduct the TDS for it.
Loan FacilityYou can attain a loan against your fixed deposit investment. In addition, you can avail up to 90% of the investment amount as a loan. No loan facility available for your recurring deposit investment. 
Premature withdrawalFor a fixed deposit investment, when you withdraw the investment amount before maturity. Then, premature withdrawal is allowed with a penalty. For a recurring deposit investment, you withdraw your recurring deposit amount before maturity. You have to pay the penalty towards the same for premature withdrawal.

What Should You Choose – Fixed Deposit Or Recurring Deposit?

When you cannot invest a lump sum together in a fixed deposit but can save a small portion each month, opt for a recurring deposit investment. Both investment options are best suitable for an investor who doesn’t want to take any risk. 

When you are an individual with a lower income and want to have secured investment, these are the best investment choices. You can use the online calculator to find out the maturity amount before making your investment choice. 

Though one single investment product cannot meet all your needs, a recurring deposit will be suitable for you. When you consider a recurring deposit investment, it will put a less financial strain on you and provide higher returns like a fixed deposit investment. 

About the author, Declan Yin

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