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  • Fixed Deposit BYTES FROM OUR KITCHEN

    Difference between Fixed Deposit and Recurring Deposit

    There is a whole world of investment options out there, with many ways to increase your savings. Fixed deposits and Recurring deposits are among the best ways to mobilize your idle savings and have them work for you.

    Let's take a look at the points with the table below which explains FD vs RD:

    Fixed Deposits Recurring Deposits
    Purpose: To enable investors to mobilize idle savings and earn with a higher rate of interest than regular savings bank accounts. Purpose: To inculcate a regular habit of savings among the public.
    Duration: Fixed deposit accounts can be opened for a minimum of 7 days, to a maximum of 10 years. Duration: Recurring Deposit accounts can be opened for a minimum of 6 months, and a maximum of 10 years.
    Eligibility: All resident Indians and Hindu Undivided Families (HUFs) are eligible to open a fixed deposit account. Eligibility: All resident Indians and Hindu Undivided Families (HUFs) are eligible to open this account. RD accounts can also be opened for minors by their parents or legal guardians.
    Compound Interest and Impact of Compounding Frequency: Interest on investments made in a FD compounds, and earns interest on the new balance after each compounding. The following formula explains this further: Where:
    A = Final Amount that will be received P = Principal Amount. r = Annual nominal interest rate. n = number of times the interest is compounded per year. t = number of years
    Compound Interest and Impact of Compounding Frequency: Most banks that offer Recurring Deposit usually compound interest on a quarterly basis. Compound interest is interest that is added to the principal amount so that from then on, the interest that has been added also earns interest. This addition of interest to the principal is called compounding. The following formula gives you the total amount one will get if compounding is done: Where: M = Maturity value. R = Monthly instalment. n = Number of quarters. i = Rate of interest/400.
    Renewals and withdrawals of Fixed Deposit Accounts:
    • Rolling over of deposits for another term where term, in which the tenure can differ.
    • Auto-renewal: The tenure of deposit doesn't change, but the interest rate depends on the prevailing interest rate at the time of renewal.
    • Deposits can be encashed at maturity.
    • Premature withdrawals are subject to penalties.
    • Amounts being withdrawn above Rs.20,000 must be transferred to the depositors savings bank account.
    • Amounts being withdrawn below Rs.20,000 can be taken in cash.
    • For sweep-in facility and flexi-deposits, withdrawals are allowed on the interest accrued by the FD, the balance will then be held as a new deposit.
    • No withdrawals are allowed for a minimum of 5 years in the case of tax-saving deposits.
    Renewals and withdrawals of Recurring Deposit Accounts:
    • During the premature closure of the RD for reinvestment in a term deposit, interest will be paid to the account holder without reducing interest rate by 1% (as penalty).
    • If the account holder does not stay with the bank after prematurely closing the account, the interest rate will be (whatever the interest rate was, minus 1% as penalty).
    • Partial withdrawals are not allowed for RDs, but some banks offer a loan facility against the RD, where the RD must be pledged as collateral.
    • Premature withdrawals are possible, but the rate of interest will be less than the base rate (which is around 8.40%).
    Nominations under Fixed Deposit Schemes:
    • A nominee is the person named to receive the funds accrued in a particular FD upon the depositor's death.
    • Nominee details required: Name, age, address, relationship with depositor, details of legal guardians.
    • Only one nominee per deposit account.
    • Proof of depositor's death required to claim funds.
    Nominations under Recurring Deposit Schemes:
    • A nominee is the person named to receive the funds accrued in a particular RD upon the depositor's death.
    • Nominee details required: Name, age, address, relationship with depositor, details of legal guardians.
    • Only one nominee per deposit account.
    • Proof of depositor's death required to claim funds.
    Loan against Fixed Deposit
    • Loans can be availed by keeping your FD as collateral.
    • Loans are given as an alternative to those who need funds, but do not wish to break the deposit account prematurely.
    • Most banks allow for loans in the range of 70% - 90% of the deposit value.
    Loan against Recurring Deposit
    • Loans can be availed by keeping your RD as collateral.
    • Loans are given as an alternative to those who need funds, but do not wish to break the deposit account prematurely.
    • Banks offer loans for up to 90% of the deposit value.
    Income Tax on FD
    • Income on FDs is taxed as per the depositors tax slab.
    • Interest on FDs is calculated on an annual or cumulative basis, but it's taxed on an accrual basis - revenue is recognised when earned and expenses are recognised when incurred.
    Income Tax on RD
    • Income on RDs is taxed as per the depositors tax slab.
    • No TDS, but the investor needs to include the interest accrued during the year in the IT return.

    So which one should you invest in? A fixed deposit or a recurring deposit?

    It all depends on your needs. A fixed deposit account earns interest in a compounding manner on the initial lump sum deposited. The entire amount earns money for 1 year, but in the case of recurring deposits, the first instalment earns interest for 12 months, the second for 11 months, the third for 10 months, and so on until the end of the deposit term.

    In real time, you make more money with a fixed deposit (As illustrated by the below example), but it does not have the flexibility of a recurring deposit account in terms of being able to deposit smaller amounts as and when they become available to you.

    Example:

    Particulars Fixed Deposit Account Recurring Deposit Account
    Amount invested Rs.24,000 (lumpsum) Rs.2,000 (per month for 12 months)
    Interest rate per annum 9% (compounded quarterly) 9% (compounded quarterly)
    Total annual interest earned Rs.2,234. Rs.1,195.
    Total account balance after one year Rs.26,234. Rs.25,195.

    The difference in total income between Fixed Deposit and Recurring Deposit Accounts is Rs.1,039 – as can be seen in the above example. Both types of accounts have their own benefits and drawbacks, but the bottom line is that you earn more with a Fixed Deposit Account (even though the Recurring Deposit Account allows you to stagger your investments in smaller equal portions).

    Perfect Fixed Deposits Deals for you

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    Fixed Deposit vs Recurring Deposit Reviews

    • Axis Bank Fixed Deposit
      "Very Assured Fixed deposit"
      0.5 5.0/5 "Blown Away!"
      I opened a Fixed deposit in Axis bank for one year of term period . They sent a physical copy for my fixed deposit which gives a good assurance about that bank . So that my nominee can be aware of my FD and can approach them very easily if something happens to me . I can check the status of my FD through on line itself .
      Was this review helpful? 0
      , hyderabad
      Reviewed on Apr 23, 2019
    • HDFC Bank Fixed Deposit
      "Excellent services"
      0.5 4.5/5 "Excellent!"
      The best bank for a fixed deposit is HDFC Bank. The customer support is good and they are responsive as well. They offer an interest like other bank on my savings. The best is there is no lock in period so I close this account when ever I want too and I can do it with just a click away online. Where as other banks they would ask me to go to the home branch.
      Was this review helpful? 2
      , new delhi
      Reviewed on Apr 16, 2019
    • review Fixed Deposit
      "Good interest on savings"
      0.5 5.0/5 "Blown Away!"
      I also have a fixed deposit with Saraswat Cooperative Bank. The customer support is good and they are responsive. I been a customer for 20 years. The interest they provide on my savings is more than satisfactory and there are no charges taken for this account features.
      Was this review helpful? 1
      , mumbai
      Reviewed on Apr 15, 2019
    • SBI Fixed Deposit
      "Less interest rate"
      0.5 5.0/5 "Blown Away!"
      Two months before I deposited my money nearly 1,50,000 in SBI . I am really happy with their customer service and response . But the interest rate is around 6.85 % which is lesser comparing to other bank . Since It is Government bank, I need not to worry in future if anything uncertain happens .
      Was this review helpful? 1
      , chennai
      Reviewed on Apr 15, 2019
    • Central Bank of India Fixed Deposit
      "Excellent service"
      0.5 5.0/5 "Blown Away!"
      I have done fixed deposit on CENTRAL BANK OF INDIA an year ago, i did not face any issue in creating account. They have given me limited tenure period, i use to pay my payment through my credit card of same bank, now i have withdrawn my deposit. I got good interest rate so far my experience was good.
      Was this review helpful? 1
      , hyderabad
      Reviewed on Apr 15, 2019
    • Citibank Fixed Deposit
      "Satisfactory"
      0.5 5.0/5 "Blown Away!"
      I also have a fixed deposit with Citibank. I could get the clear details online. Though I would not be able to open this account through the mobile application. I can do it through the desktop. It has been a good experience till date and beneficial too.
      Was this review helpful? 0
      , mumbai
      Reviewed on Apr 15, 2019
    • SBI Fixed Deposit
      "Good in all"
      0.5 5.0/5 "Blown Away!"
      I also have a fixed deposit account with State Bank of India. The customer services are good. The process can be done online. The lock in period depends on the choice of the customer. The minimum tenure is six months. The interest rate provided is also equally good.
      Was this review helpful? 4
      , new delhi
      Reviewed on Apr 13, 2019
    • Bank of Baroda Fixed Deposit
      "Overall no hassles"
      0.5 5.0/5 "Blown Away!"
      It is a very simple process to open a fixed deposit account with Bank of Baroda. The lock in period is for five years. They provide a very good interest on my savings. The process at the bank is also good. There are no hassles in the overall experience.
      Was this review helpful? 0
      , faridabad
      Reviewed on Apr 12, 2019
    • SBI Fixed Deposit
      "Looking for More Investment"
      0.5 5.0/5 "Blown Away!"
      Five years before , I opened a Fixed deposit in SBI , It automatically renewed on every year. I just monitors in online . I am looking for more investment in the future. At one stage I open this fixed deposit for my children's education or marriage .
      Was this review helpful? 1
      , secunderabad
      Reviewed on Apr 10, 2019
    • Federal Bank Fixed Deposit
      "Good customer support"
      0.5 5.0/5 "Blown Away!"
      In Federal bank , for Recurring deposit they provide very good interest rate of almost 7.5% .Even it is applicable for shorter period and longer term also . Very good customer support . After comparing with other banks , I decided to start my FD in Federal bank .
      Was this review helpful? 1
      , kochi
      Reviewed on Apr 09, 2019
    • review Fixed Deposit
      "Overall good"
      0.5 5.0/5 "Blown Away!"
      I hold a fixed deposit account with City Union Bank. The rate of interest is of 7.25% on my savings. The customer support is good and they are responsive as well. It was easy to open this account and I can do it online. There are no hassles in the overall service.
      Was this review helpful? 0
      , chennai
      Reviewed on Apr 05, 2019
    • ICICI Bank Fixed Deposit
      "Good Accesibility"
      0.5 5.0/5 "Blown Away!"
      My fixed deposit with ICICI, I have opened the account through online just from the I mobile. I invested around Rs. 1 lakh its for long duration. The interest is good, I can withdraw the money through online banking without any charges. I am very fine with them.
      Was this review helpful? 4
      , indore
      Reviewed on Apr 03, 2019
    • IndusInd Bank Fixed Deposit
      "Good interst for FD savings"
      0.5 4.0/5 "Great!"
      I opened fixed deposit account through online, the process was simple without any documentation. Currently the bank is providing the interest around 8% for the FD account. I done it before year it has tenure this year one year. I think this august my Fd amount gets matured.
      Was this review helpful? 4
      , bangalore
      Reviewed on Apr 03, 2019
    • Standard Chartered Bank Fixed Deposit
      "Good service"
      0.5 4.5/5 "Excellent!"
      Hold a fixed deposit Account with STANDARD CHRATED BANK . The best thing is their Customer Service .The response of banking service and banking staff is good here . The online banking is good and the services at the branch is also satisfactory.So far it has been good experience with STANDARD bank .
      Was this review helpful? 1
      , new delhi
      Reviewed on Apr 03, 2019
    • HDFC Bank Fixed Deposit
      "Its Good"
      0.5 4.0/5 "Great!"
      I went to the bank for the FD process, the service was good they helped to open the account on the same day. I took the fixed deposit for the period of three years and I deposited Rs. 1 lakh, I would get the amount of Rs. 1.35 lakh. I do have HDFC online access .
      Was this review helpful? 3
      , hyderabad
      Reviewed on Apr 03, 2019
    • Post Office Fixed Deposit
      "Good Experience"
      0.5 4.0/5 "Great!"
      My fixed deposit got matured with Post office, the interest was nominal. The staff are good they gave me good service. There was no online option hence I need to visit for depositing the cash. I invested for five years for fixed deposit, my experience was good.
      Was this review helpful? 1
      , chennai
      Reviewed on Apr 03, 2019
    • HDFC Bank Fixed Deposit
      "Good overall"
      0.5 5.0/5 "Blown Away!"
      I have a fixed deposit account with HDFC Bank and the banking process is good. I could open this account online and the account has been beneficial too. I earn a good interest. I can also close this account without having to go in person to the bank. It can be done online too.
      Was this review helpful? 3
      , bangalore
      Reviewed on Mar 29, 2019
    • IndusInd Bank Fixed Deposit
      "Good Investment with Indusind bank"
      0.5 5.0/5 "Blown Away!"
      One time investment I have done in Indusind bank as a fixed deposit, it has locking period around one year. They are providing the interest around 8% for one year. Online option is easy to activate the service and closing, there is no charges for the FD maintenance.
      Was this review helpful? 2
      , indore
      Reviewed on Mar 26, 2019
    • Axis Bank Fixed Deposit
      "Convenient"
      0.5 4.5/5 "Excellent!"
      I have a Fixed Deposit with Axis Bank because they have offered more interest than ICICI BANK and its been more than 1.5 years. Their customer service is always good. The interest rate is around 7.6% which am not sure. I can manage the account online. I opted for 18 months.
      Was this review helpful? 2
      , hyderabad
      Reviewed on Mar 26, 2019
    • Bank of Baroda Fixed Deposit
      "Need improvement on customer support"
      0.5 4.0/5 "Great!"
      I have done one time investment fixed investment in Bank of Baroda, it has five year of locking period. The interest is nominal for the FD, I believe BOB give the interest around 8% , however there was no proper information regarding the interest. My father have taken this FD on my name, every year I deposit the amount.
      Was this review helpful? 1
      , noida
      Reviewed on Mar 25, 2019
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