Financial mistakes

Recurring Deposit (RD) & Fixed Deposit (FD)

This blog covering about Recurring Deposit (RD) & Fixed Deposit (FD) and answers to some of the top questions about these 2 investment instruments.

What is Recurring Deposit (RD) & Fixed Deposit (FD)?

RD & FD is two return guaranteed fixed-income investments. Both will have a fixed maturity period. The interest rate of both RD & FD is known upfront and it remains unchanged until the maturity period of the deposit. Interest rates will vary from year to year.

The interest rates offered on fixed deposit (FD) and Recurring deposit (RD) mostly the same.RD & FD schemes often offer only modest returns compare to other market-linked investment schemes.

What is FD?

A fixed deposit (FD) is a financial instrument, which provided by Banks or Non-Banking Financial Companies. In FD a fixed amount needs to deposit in banks or NBFC for a fixed period of time.FD offers a higher rate of interest than savings account to the account holders. Interest remains unchanged until the maturity date.

What is RD?

Recurring deposit (RD) is a financial instrument alternative to fixed deposits for investors. In a recurring deposit, investors have to deposit a certain amount every month for a determined fixed tenure.

What is the difference between FD and RD?

  • In Fixed Deposit (FD), the Fixed amount is deposited for a fixed period of time,  Whereas, in Recurring Deposits, the customer deposits fixed amounts in regular intervals for a fixed period of time. 
  • The maturity amount with interest will be higher for FD than RD for a fixed period of time.
  • RD helps to develop the habit of saving on a regular basis, whereas FD help to develop the habit of saving the amount for a fixed period of time.
  • A fixed deposit provides interest on the deposited amount, whereas for RD interest will add on the monthly basis.

Which is better RD or FD?

FD will have a higher interest amount earned than RD. In the view of investment, in RD investors do not need to invest a lump sum amount at one time, but in FD need to do a lump sum investment. Investing in an RD is a good option for salaried person and FD is good for those how to have a lump sum amount in hand.

Can withdraw money from the RD account before maturity?

The withdrawal is permitted only if the RD is operational for a minimum of 1 year, in that 12 monthly deposits required. Withdrawal is permitted for one time with a cap of a maximum of 50% of the deposits before the maturity period. RD can stop any time with a penalty of deduction of one month of interest earned.

What happens if the RD installment is not paid?

Non-payment of a monthly installment leads to a default fee of 1% default amount, this rule very time to time and bank to bank. If there is a default amount, the depositor has to first pay the default fee and then pay the current month’s deposit to continue the RD.

Can we change the RD amount?

Once started the RD account, the term and deposit amount cannot be changed. Currently, only a monthly deposit payment option is available that also can’t be changed once it started.

Is RD and FD account Tax-free?

The interest earned on FDs and RDs throughout a financial year is taxed. Tax will be deducted at source (TDS) when it is credited to linked savings or current account. If we don’t want the bank to deduct the TDS, we can make a request to the bank. Tax deducted can clam back during the return filing if income is lesser than the tax threshold.

Is Post Office RD safe?

Post office saving schemes and bank Recurring deposits are safe and we can easily open, as it is government-backed schemes and also it offers assured returns.


Both RD and FD are very easy to start and gives a good amount of returns. It can be opened through any bank or with NBFC. Both are the safest investment instruments and gives guaranteed returns to the investors. Depending on the investor’s convenience they can choose any of these financial instruments for their wealth creation.

Thanks & Regards


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Harry J P is a Business development and sales professional passionate about sharing knowledge in the domain of sales, and personal finance which helps in Personal financial learning for newbie earners. This blog came out of the experiences in the domain of personal finance, business development, and the share market.

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