RD - Recurring Deposit

On understanding what RD is and how it works, it is imperative that you consider the below factors before opening this type of fixed term deposit.

1. Investment amount: You can invest as low as Rs.500 per month in a RD deposit. The returns that you get will depend on the amount you invest each month. Hence, having an understanding of how much to invest per month is important when considering opening an RD account.
2. Tenure: Once you open an RD account, you cannot alter the tenure chosen. Hence, when considering to open this type of account, consider the tenure as you will have to keep on paying the specific amount each month your returns and rate of interest too would depend on the tenure.
3. Interest rate: RD investment helps you get decent interest on investment. The rates vary from bank to bank and individual category too. Senior citizens usually get a higher interest rate. Hence, it is best to open the RD account with the bank that offers you the highest interest rate.
4. Tax on interest rate: The interest earned on recurring deposits is taxable only on amount above Rs. 40,000. In case the interest earned is less than Rs. 40,000, tax will not be deducted.
5. Withdrawals: Partial withdrawals are not allowed for RDs. However, premature withdrawals can be made, but it will attract penalties.

Wonder whether you should invest in RD or not? Here are a few benefits of doing so.

1. Safe Investment: Over the years, recurring deposit has become a safe investment option since it carries no risk at all. By investing in an RD account, you can ensure that your savings are safe and additionally earn great returns on investment too. You do not stand to lose out on funds since the interest rates and the maturity amount you get are predefined.
2. Earn on your savings : A RD account helps you grow your wealth by offering you interest on your savings. The longer the tenure, the higher will be the interest you earn and vice versa.
3. Lump sum payout : The maturity amount is paid out on a lump sum basis at the end of the tenure. This amount includes both your principal amount as well as the tenure.
4. Access online: RD accounts can be opened and operated online which makes it easy for you to track your investment. You can choose the tenure, deposit amount of your choice based on your income and future financial planning.
5. High rate of interest for senior citizens: RD accounts offer high interest rate to senior citizens, enabling them to earn good returns and provide them a sense of relief for spending their retirement years.

In times of a financial emergency, you can close your recurring deposit account online or either offline by visiting the bank.

Steps to close RD account online

Usually, the below steps may vary from bank to bank. But few common steps to follow are:

• Login to your net banking or banking app using your registered mobile number of user ID
• Click on save tab and deposits
• Then click on break or dissolve the deposit
• You will then receive OTP to proceed with the request of RD foreclosure
• The accumulated amount will then be credited to your savings account after deduction of the penalty charged by the bank

Steps to close RD account offline

• Visit the bank and get the RD foreclosure form
• Fill the form
• Submit your KYC documents
• An RD deposit certificate will be issued
• The deposit can be then withdrawn. You can either opt to get cash or get the amount credited to your bank account