Fixed Deposits or Recurring Deposits?-benefit analysis

Fixed deposit or Recurring deposit, which yields more?

Financial planning is important in the current economy, where expenses run over income and savings are relatively small or nil. Financial planning will reap rewards in future.

There is always a doubt zone where to invest your surplus fund in fixed deposit or in Recurring deposit. Both FD (fixed deposit) and RD(recurring deposit) has more growth potential than that of an ordinary savings account where interest rates are low.

Let’s check the features of both accounts

Recurring deposit

• Monthly deposits of Minimum Rs.100/- no maximum.
• Minimum period 12 months maximum 120 months.
• Rate of interest as applicable to Bank’s TDR / STDR for the period of the RD.
• Loan / Overdraft up to 90% available against the balance in RD account.
• TDS is not applicable.

   Fixed deposit

• Period of deposit from 7 days to 10 years.
  

• Deposit Amount: Minimum: Rs.1000/-, Maximum: No limit
  

• Payment of interest at Monthly/Quarterly/Calendar quarter basis as per your requirement.
• Senior Citizens get 0.25% extra interest rate
• Loans / OD up to 90% of the Principal deposit
• TDS is charged

Whether to deposit in FD or go with RD depends on your availability of funds. If you have ample funds and there is no immediate necessity, then you can invest in Fixed Deposit. On the other hand, if you can regularly invest a fixed amount (minimum RS 100) over a period of time then recurring deposit will be beneficial.

Say, if you invest 120000 for 10 years (@ 8 %) you will receive a sum of 264964 a interest of 144964.76,otherwise if you are depositing Rs 1000/PM for a period of 10 years, your deposit on maturity will be below Rs. 2,00,000

To conclude

Funds

If you have ample funds and there is no immediate necessity, then you can invest in Fixed Deposit. On the other hand, if you don’t have sufficient amount but, can regularly invest a fixed amount (minimum RS 100) over a period of time then recurring deposit will be beneficial.

Maturity amount

Mauturity amount on Fixed deposit will be higher than that of a Recurring deposit

Taxability

FD- In a fixed deposit, if the interest income exceeds Rs 10,000 in a year, the bank will charge TDS if Form 15G/15H is not submitted

RD-TDS is not charged on RD

Analysis Report–

Fixed Deposit seems beneficial as a long term investment than recurring deposit, if you have sufficient funds . Loan / Overdraft up to 90% available against the balance in FD account.  

Recurring Deposits are suitable to those who have fixed and regular income and can part a small portion of income to deposit it as RD every month, tenure period ranges between 12 to 120 months and interest from RD is free from TDS. Further, Loan / Overdraft up to 90 % is available against the balance in RD account. Delay in payment of installment will attract penalty.  

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