All You Need to Know About FD VS RD

People who want to invest their funds have a wide variety of possibilities on the market. However, people must first research and contrast the available investment possibilities before deciding which one is best for them. The most renowned, recommended, and well-liked investment alternatives in India are term deposits. Many prefer using these investing options since their investments are secure and safe at the bank. They receive interest on their money as well. Recurring Deposits (RD) and Fixed Deposits (FD) are the two categories of term deposits.

The most famous investment options in India are fixed deposits as well as recurring deposits, particularly if you want to make a risk-free investment. The fact that you receive fixed returns for a specific time period with no risk associated is one of the main benefits of investing in such an FD or RD. Because they are not market-linked and offer a fixed rate of return, bank fixed deposits and recurring deposits are low - risk investment alternatives than investing in stocks.

What is a Fixed Deposit (FD)?

A fixed deposit, as its name indicates, is an investment choice where both the investment duration and the interest rate are predetermined. At the start of the tenure, which normally lasts between 7 days and 10 years, you can invest once. You receive the lump amount at maturity. You have the option of receiving the interest on the fixed deposit either on a regular basis or when it reaches maturity.

What Is a Recurring Deposit (RD)?

Recurring deposits involve the monthly deposit of a set sum into a bank or other financial institution. The interest rate is also set for the duration, which is normally between six months and ten years. You receive the lump amount at maturity. You have the option of receiving the interest on the recurring deposit either on a regular basis or when the account reaches maturity.

Differences Between FD And RD

You must buy a term plan as it offers the following benefits - 

• Time Duration

The minimum term for fixed deposits is seven days, whereas the minimum term for recurring deposits is six months. Both programmes can run for a maximum of 10 years.

• Taxation

Both recurring deposits and fixed deposits are taxed, meaning that interest generated on both types of plans is taxed. Although it is not necessary to pay TDS in the case of RD, the person must disclose interest received when completing their income tax return. The account holder in a fixed deposit must pay TDS if the interest generated on the deposit amount exceeds Rs. 20,000. At the beginning of April 2019, this cap will be increased to Rs 80,000. If the PAN is provided, the TDS is 10%; otherwise, the TDS is 20%.

• Returns

When FD returns are compared against RD returns, FD appears to offer higher returns. Because RD accounts need monthly contributions from the account holder, interest is collected as a result. The FD money is often deposited just once, as a lump payment, and yields a greater interest rate. 

• Types

Cumulative Fixed Deposit, Non-Cumulative Fixed Deposit, NRIs FDs, Regular FDs, Senior citizen FDs, Standard FDs, Tax saving FDs, Bank deposits, and Company deposits are types of fixed deposits. Regular recurring deposit account, Recurring deposit account for NRI, minors, and for senior citizens are types of Recurring deposits.

Conclusion

There are many investing alternatives accessible, but it's critical to understand which ones best meet your needs. Everyone aspires to select a financial product with high returns. Fixed Deposit (FD) and Recurring Deposit (RD) are the two most often utilised safe investment vehicles (RD). The plan that best meets your needs will be determined by those needs. Fixed deposits provide greater interest rates, but because you may deposit smaller sums with recurring instalments, they are more flexible.

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Understand The Survival Benefits Of Term Insurance Plan In India