Should I Pick An FD Or RD For Investment?

Fixed deposits and recurring deposits are two of India's most popular investment options, especially among risk-averse individuals. The principal advantage of investing in a fixed deposit or recurring deposit plan is that the returns are assured and there are no risks. Many consumers are unsure whether to invest in an RD or an FD. Fixed-income products such as the RD and FD are accessible from all major banks and financial institutions. You can invest a certain amount of money in each programme and receive a fixed interest rate. Both the capital and interest will be returned to investors at the end of the term.

What Are the Differences Between Fixed and Recurring Deposits?

Fixed Deposits and Recurring Deposits differ in the following ways:

• Tenure

The stay can last anywhere from a week to ten years. The individual determines how long they will labour. The duration spans from six months to ten years. Individuals must decide how long they want to work.

• Subscriptions That Are Renewable

To renew your fixed deposit, you can reinvest the principal amount for a new period with or without interest.

Such an option does not exist. Your savings account receives the lump cash plus interest.

• The Amount Invested

A client who wants to make a one-time investment can get a Fixed Deposit from any bank or financial organisation.

Everyone who can afford to invest a small amount of money every month in any bank or financial institution can take advantage of recurring deposits.

• Withdrawal

You can take money out of your fixed deposit while the rest earns interest. A partial withdrawal of a recurrent deposit is not possible. You can, however, leave either one early.

• Getting Funds

Fixed Deposits are a way to get a loan. The loan amount is adjustable, up to 90% of the Fixed Deposit's value.

Recurring Deposits can also be financed. A deposit of up to 90% of the total amount is possible.

• Tax Rates for Individuals

FD and RD are nearly identical in terms of taxability, with one exception. Both of these investing strategies produce interest, which is added to your total income and taxed at your marginal rate. Any interest you make on your FD or RD is taxed at 30% if you're in the 30% tax bracket.

• Clause of Default

A person cannot default on payments because it is only done once at the start with a lump sum payment.

The bank has the authority to deactivate such Recurring Deposit accounts if a person fails to make payments for six months in a row.

Bottomline

Both FD and RD are good investment options that guarantee a return on your money. FDs are a good option for people with a large sum of money to invest and who want monthly or quarterly cash flow. Customers who like to make little monthly payments and are ready to wait a long time for their money to be refunded can benefit from RDs.

Also read - How To Choose An Investment Plan?

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.