Fixed Deposit (FD) vs Recurring Deposit (RD)
Compare Fixed Deposits and Recurring Deposits to choose the best guaranteed saving scheme for your financial goals.
FD vs RD: Head-to-Head Comparison
| Parameter | Fixed Deposit (FD) | Recurring Deposit (RD) |
|---|---|---|
| Investment Style | Lump sum (one-time deposit) | Monthly regular instalments |
| Interest Calculation | Compounded quarterly on the total principal | Compounded quarterly as instalments accumulate |
| Ideal For | Individuals with idle lump-sum capital | Salaried workers saving from monthly income |
| Interest Rates | Identical bank rates, locked at deposit | Identical bank rates, locked at deposit start |
| Taxation (TDS) | Taxable at slab rates; TDS if interest > ₹40k | Taxable at slab rates; TDS if interest > ₹40k |
Key Strategic Differences
Maturity Yield: Because the entire principal compounds from Day 1 in a Fixed Deposit, FDs yield higher final interest compared to an RD with the same total investment spread over time.
Compounding Frequency: Both schemes compound quarterly in Indian banks. For example, if you open a 1-year RD of ₹10,000/month, the first month's instalment compounds for 12 months, the second for 11 months, and so on.
Liquidity: Premature closure is permitted in both, usually attracting a penalty of 0.5% to 1.0% on the interest rate.