A Recurring Deposit (RD) is a type of term deposit that offers customers the advantages of flexibility, guaranteed returns, and liquidity. Unlike a Fixed Deposit (FD), investing in an RD allows individuals to invest monthly and earn interest based on the applicable rates. Investing in a recurring deposit in India is offered by banks as well as other financial institutions. While opting to invest with a private limited company may potentially yield higher returns, choosing a bank is generally considered a safer option.
In a recurring deposit, you earn interest at a set rate over the chosen period. This interest is added to your original deposit either regularly or at the end of the term. When the recurring deposit matures, you receive your initial investment plus all the interest earned during the entire period.
Key features of a recurring deposit:
Benefits of investing in a recurring deposit:
| Bank | Rate of Interest* | Deposit Tenure (for deposits up to Rs. 2 crore) | |
|---|---|---|---|
| Regular Individuals | Senior Citizens | ||
| HDFC Bank | 6.45% | 6.95% | 12 months |
| Axis Bank | 6.60% | 7.25% | 1 year < 1 year 5 days |
| Yes Bank | 7.25% | 7.75% | 12 months |
| State Bank of India | 6.40% | 6.90% | 1 year to less than 2 years |
| Canara Bank | 6.50% | 7.00% | 1 year |
| IndusInd Bank | 7.25% | 7.75% | 12 months |
| DCB Bank | 7.00% | 7.50% | 12 months |
| ESAF Small Finance Bank | 8.25% | 8.75% | 365 – 545 days |
| Standard Chartered Bank | 6.90% | 7.40% | 12 months |
| Ujjivan Small Finance Bank | 8.10% | 8.60% | 1 year to 2 years |
*Recurring Deposit Rates are subject to change without any prior information.
| Bank | Rate of Interest (Regular Individuals)* | Deposit Tenure (for deposits up to Rs. 2 years) |
|---|---|---|
| HDFC Bank | 6.85% | 27 months |
| State Bank of India | 6.40% | 1 year to less than 2 years |
| Canara Bank | 6.50% | 1 year |
| Axis Bank | 7.00% | 2 years < 30 months |
| IndusInd Bank | 7.25% | 12 months |
| Yes Bank | 7.75% | 24 months |
| DCB Bank | 8.00% | 36 months |
| Utkarsh Small Finance Bank | 9.00% | 456 days to less than 2 years |
| Ujjivan Small Finance Bank | 8.10% | 12 months to 24 months |
| Deutsche Bank | 7.75% | 60 months |
*Recurring Deposit Rates are subject to change without any prior information.
| Bank | Rate of Interest (Senior Citizens) | Deposit Tenure |
|---|---|---|
| State Bank of India | 6.90% | 1 year to less than 2 years |
| RBL Bank | 8.15% | 24 months to less than 36 months |
| IDFC First Bank | 7.75% | 12 months |
| Standard Chartered Bank | 7.40% | 18 months |
| ICICI Bank | 7.50% | 18 months |
| IndusInd Bank | 7.75% | 12 months |
| Yes Bank | 8.25% | 24 months |
| DCB Bank | 8.50% | 36 months |
| Utkarsh Small Finance Bank | 9.50% | 456 days to less than 2 years |
| Ujjivan Small Finance Bank | 8.60% | 12 months to 24 months |
*Fixed Deposit Rates are subject to change without any prior information
Note: Fixed Deposit interest rates are applicable on the amount below Rs. 2 Crore.
Interest rates on recurring deposits are subject to change over time due to various factors. It's crucial for potential investors to stay informed about the prevailing RD interest rates in the market.
The following tables display varying RD rates for regular citizens and senior citizens.
Many people view term deposits as a safe and profitable investment choice. Fixed deposits, a type of term deposit, involve a single investment, while recurring deposits are ideal for those with regular income who want to invest regularly.
Take note of the following points to grasp the significance of investing in a recurring deposit:
Investing in a recurring deposit allows for shorter lock-in periods, enhancing liquidity. This is beneficial for individuals aiming to efficiently meet their short-term goals.
Recurring deposit stands out as one of the safest investment options available. With no ties to the market, economic fluctuations won't impact investors' returns. They earn profits based on the fixed rate agreed upon at the outset, ensuring stability regardless of market conditions.
Unlike Fixed Deposits (FDs), investors have the flexibility to make regular deposit payments with a Recurring Deposit (RD). This feature is ideal for individuals who may not have a large sum of money upfront but can consistently save smaller amounts over time..
Given that Recurring Deposit (RD) interest rates align with those offered in Fixed Deposits (FDs), investing in an RD typically yields higher returns compared to other bank deposit schemes such as savings accounts.
To open an RD account, customers need to prepare the following documents:
Note: This list may not cover all necessary documents, so it's advisable to check with the respective bank or financial institution for any additional requirements.
Individuals have the option to open a recurring deposit account both online and offline. For online applications, account holders can visit the official bank website or log in to the net banking portal or mobile banking app to apply for a recurring deposit.
For offline applications, individuals can visit the nearest bank branch or contact customer care for assistance and further inquiries.
Similar to a fixed deposit scheme, the interest income earned on a recurring deposit is considered part of the investor's annual income. This income is categorized under the 'Income from Other Sources' and is fully taxable according to the applicable income tax slab.
If the interest income from bank or post office deposits totals Rs. 40,000 or less, no tax is levied. However, if it exceeds this limit, banks impose a 10% TDS (Tax Deducted at Source).
Individuals falling under the 5% income tax slab can file an Income Tax Return to claim a refund. Those not liable to pay any income tax should submit Form 15G to their respective banks to avoid TDS deduction. Senior citizens should submit Form 15H for the same purpose.
Note that these forms must be submitted annually for each recurring deposit owned by the individual.
Fixed deposits and recurring deposits are both considered safe investment options offered by banks, with the same interest rates applicable to both types of term deposits.
However, despite their similarities, there are key differences between fixed deposit and recurring deposit. Here are some important distinctions:
| Fixed Deposit | Recurring Deposit |
|---|---|
| Deposit term ranges from 7 days to 10 years. | Deposit term ranges from 6 months to 10 years. |
| Entire deposit amount is paid at once. | Deposit amount is paid in monthly installments. |
| No maximum limit on deposit amount (limits may vary between banks). | Maximum deposit amount capped at Rs. 15 lakh (amount may vary depending on the bank). |
| Interest is calculated on the entire amount, potentially resulting in slightly higher returns compared to RDs. | Interest is calculated on monthly installments, potentially resulting in lower returns compared to fixed deposits. |
When it comes to returns, investing in a fixed deposit usually offers higher returns compared to recurring deposits. However, if flexibility in making deposits is a priority, recurring deposits have an advantage. With fixed deposits, the entire payment must be made at once, whereas with recurring deposits, investments can be made on a monthly basis.
No, if allowed by the bank, premature withdrawal of a recurring deposit may incur a penalty. However, some banks may offer the option for partial withdrawals.
The minimum tenure varies from bank to bank but is typically around 6 months.
Yes, Non-Resident Indians (NRIs) can open a Recurring Deposit (RD) with banks in India.
Yes, most banks offer a preferential interest rate on recurring deposits for senior citizens. Typically, this rate is 0.50% higher than the standard rate offered to the general public.
Yes, banks provide a nomination facility for recurring deposit accounts.
The amount received at maturity includes the deposited sum along with the accrued interest. If the recurring deposit offers additional incentives, those will also be added to the maturity amount.
Yes, the interest earned on a recurring deposit is taxable according to the individual's applicable income tax slab.
It varies depending on the bank. Some banks allow non-customers to open recurring deposit accounts, while others may offer the facility exclusively to existing customers.