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Fixed Deposit vs Recurring Deposit: Which is Better for Safe Investment?
When it comes to choosing a safe investment option, most people in India compare fixed deposit vs recurring deposit. Both FD and RD are trusted by millions as they offer guaranteed returns with minimal risk. However, choosing between these two can be confusing. In this article, we will explain the difference between FD and RD, compare their benefits, and help you decide which option suits your investment style.
What is a Fixed Deposit (FD)?
A Fixed Deposit (FD) is a traditional savings instrument where you invest a lump sum amount for a fixed tenure at a predetermined interest rate. This interest rate remains locked from the day you invest, giving you stable and assured returns.
Tenure options: 7 days to 10 years
Interest payout: Monthly, quarterly, or cumulative at maturity
Lock-in: Money stays invested till maturity unless withdrawn prematurely
FDs are ideal for those who have idle cash and want to grow their wealth safely over a fixed period.
Published March 18, 2024.
What is a Recurring Deposit (RD)?
In contrast, a Recurring Deposit (RD) is designed for people who want to save regularly. Instead of investing a lump sum, RD allows you to deposit a fixed amount every month. Just like FD, RD offers a fixed interest rate throughout the tenure.
Tenure options: 6 months to 10 years
Monthly contributions build disciplined savings habits
Safe and low-risk returns
RDs are ideal for salaried individuals or those who prefer systematic investments.
Where to Open FD and RD?
You can open Fixed Deposits and Recurring Deposits easily through:
Banks
Non-Banking Financial Companies (NBFCs)
Post Offices
This wide availability makes both FD and RD accessible for all types of investors.
Fixed Deposit vs Recurring Deposit: Interest Rates Comparison
Interest rate is a key factor when comparing fixed deposit vs recurring deposit. Generally:
| Investment Type | Average Interest Rate (2025) |
|---|---|
| Fixed Deposit (FD) | 3% to 7.25% per annum |
| Recurring Deposit (RD) | Around 6.7% per annum |
FD usually offers slightly higher interest rates compared to RD, especially for longer tenures and senior citizens.
How Safe Are FD and RD? – Insurance Coverage
Both FD and RD are backed by the Deposit Insurance and Credit Guarantee Corporation (DICGC), which insures:
Up to ₹5 lakhs (Principal + Interest) per depositor per bank
This insurance adds a safety net to your investments, making both options extremely secure.
Tax Benefits: Fixed Deposit Has an Advantage
When comparing fixed deposit vs recurring deposit from a tax perspective:
FD: You can claim up to ₹1.5 lakh under Section 80C when you invest in a 5-year tax-saving FD.
RD: No tax benefits available.
However, in both cases, the interest earned is taxable as per your income tax slab.
Premature Withdrawal: FD vs RD Rules
FD: Premature withdrawal allowed, but with lower interest rate or penalty.
RD: If you miss monthly deposits or withdraw early, penalties apply and returns reduce.
Thus, both FD and RD offer flexibility but at the cost of returns if broken prematurely.
Fixed Deposit vs Recurring Deposit: Which Should You Choose?
| Choose FD | Choose RD |
|---|---|
| If you have a lump sum to invest | If you prefer monthly savings |
| Want slightly higher returns | Want to develop saving habits |
| Need fixed returns over medium to long-term | Looking for small, disciplined savings |
Both are safe, low-risk investment options suitable for risk-averse investors.
Conclusion: Fixed Deposit vs Recurring Deposit – Make the Smart Choice
In the debate of fixed deposit vs recurring deposit, there is no one-size-fits-all answer. Your choice should depend on:
Available funds (lump sum or monthly contributions)
Investment goals (short-term or long-term)
Desire for regular saving habits
FD is ideal for those who have idle cash and want slightly higher returns. RD is perfect for those who wish to save monthly in a disciplined manner.
Before investing, always compare the latest FD and RD interest rates from various banks and NBFCs to ensure maximum returns from your safe investments.
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