What is fd and rd

You receive the lump sum on maturity, and it includes the interest amount, if you have opted to receive it, at the end of the tenure.

Keep your money safe with these bank accounts. An RD is one of the most sought-after investment options in India. It is generally preferred by people with a regular monthly income, for they can set aside some amount to save and earn returns. Under an RD, you have to deposit a fixed amount of money monthly for a pre-determined tenure. On maturity, you get the total amount, including the interest. To compare them, you need to know the difference between an FD and an RD.

Here are the most significant ones. If you wish to invest a lump sum for a certain period of time, you can do so in an FD for a fixed rate of interest decided by the bank. If you want to set aside some fixed amount of money and invest it in a bank every month, you can choose a recurring deposit. The interest earned on the amount invested is paid along with the principal amount on maturity.

You can choose to renew the fixed deposit by reinvesting the principal amount with or without interest for another term. There is no such option. The lump sum with interest is deposited in your savings account. You cannot default the payment as you have to pay a lump sum at the time of opening the FD account.

You may fail to pay the instalments, for you have to deposit a fixed amount every month. A default in paying will lead to paying a penalty. So, your first instalment will earn interest for 12 months, your second instalment for 11 months and so on. However, in Fixed Deposits , you earn interest based on your entire lump sum deposit amount, which is guaranteed to be higher than that earned on deposit instalments.

Therefore, we can see that while both serve as excellent savings options, Fixed Deposits tend to edge out with greater benefits. Fixed Deposit accounts offer more flexibility with their range of tenure, provide higher returns and are ideal for anyone seeking to invest any amount of money for a given period of time. Fixed Deposit accounts are often the difference between storing idle money and reaping handsome, monetary rewards.

Choose from a tenure ranging from 7 days to 10 years, and watch your money grow with guaranteed returns and without any market risks. If you are a customer, Apply for Fixed Deposit , here.

If you are not a customer, Apply for Fixed Deposit , here. For disclaimer, Click Here. By continuing to use the site, you are accepting the bank's privacy policy. FD or RD? The interest rates for both the calculations is assumed at 7. As the tenure of investment increases, this difference also increases. Here is how you can decide. If you have a considerable amount of money that you can invest as lump sum, fixed deposits are an ideal investment option for you.

You can earn more in the long run. To get better returns, you can invest in a cumulative FD. In this FD type, the interest that gets earned is added to the principal amount and you earn interest on it as well. You can deposit a small fixed amount every month. On maturity, the amount will get credited to your linked account. The taxability of FD and RD is almost similar with only one variation. The interest earned from both these investment options gets added to your total income and charged as per your income tax slab rates.

However, there is a difference in the nature of tax deduction. This difference in the nature of taxability makes RD a favourite investment option for many investors. Posted on 18 Jan, Shivani Chaluvadi See all articles by Shivani Chaluvadi. Subscribe Your privacy is important to us. Show comments 0. RDs encourage small savings. Moreover, they inculcate financial discipline through regular investing of a fixed amount. FD rates are higher than savings account interest rates.

Interest earned from FD can be calculated using a fixed deposit calculator. RD interest rates are higher than a bank savings account. Interest earned on RD can be calculated using a recurring deposit calculator.

FDs are liquid investments. Though they have a fixed tenure, investors can withdraw the investments anytime with a penalty. FDs have a tenure ranging from 7 days to 10 years. Investors can choose any tenure as per their goals. RD investment tenure ranges between 6 months to 10 years. Investors are free to choose the tenure of the RD based on their investment goals. Returns from RD are realised only upon maturity of the scheme. Investors are entitled to a lumpsum amount at the end of the investment tenure.

Not available. However, depositors can choose to discount the investment and withdraw the amount. Although, the interest in such cases is lower. If the depositors fail to make RD payments for six consecutive months, the bank has the right to close the account.