What is a Fixed Deposit?

A Fixed Deposit is a type of financial instrument that allows you to invest a certain amount at a financial institution or a bank. The bank will guarantee to return the entire capital that you had invested over the years along with the interest that your capital has gained. Here’s how a fixed deposit works. Once you invest a certain amount of money in an FD, the bank lends this amount to other borrowers and will charge interest on this capital. A portion of this interest gained will be returned to you along with your capital. There are 2 types of FDs:

1. Cumulative FDs

This type of FD pays your interest along with the principal at maturity. The interest that your principal has gained will be reinvested every year. With this option of FD, you can benefit from the compounding interest gain.

2. Non-cumulative FDs

Depending upon the applied FD interest rate, the non-cumulative FD pays you an interest at fixed intervals. However, you can opt to receive the interest on a monthly, quarterly, half-yearly, or yearly basis. This way, you will receive a regular source of income.

What is a Recurring Deposit?

With a recurring deposit, you will be allowed to make regular deposits, typically on a monthly basis, and earn interest on the amount you invest as principal. Recurring deposits are very flexible in several aspects. The range of investment periods varies between 6 months and 10 years. In addition, you have the flexibility to make a deposit to your RD based on your financial condition. Make sure to choose the right recurring deposit scheme that allows you to invest from a very minimal principal.

Most importantly, an RD allows you to earn a fixed amount of interest at frequent intervals until the maturity period. However, the minimum deposit tenure is 6 months while you can choose your tenure period up to 10 years.

Recurring deposit vs Fixed deposit

The key differentiating point for recurring deposit vs fixed deposit is; with an RD you need to make an investment at a fixed period whereas you need to make a one-time investment with an FD. Here are some other key RD and FD difference:

1. Taxation- FD vs RD

The interest earned on both are taxable. However, when it comes to RD, it is not necessary for you to pay TDS. But, as an investor, you will have to pay your taxes while filing your income tax returns.

2. Duration- FD vs RD

When it comes to the minimum duration of tenure, you can begin your deposit with a minimum of 7 days for FD vs RD with a duration of six months.

Recurring deposit vs Fixed deposit: Comparison

Here are a few factors that are the primary Recurring deposit vs Fixed deposit factors highlighting the difference between RD and FD.




Minimum deposit

Rs. 100

Rs. 1,000

Minimum tenure

7 days

6 months

Maximum tenure

10 years

10 years

FD vs RD- Tax saving option

Available with a lock-in period of 5 years

Not available

FD vs RD- Frequency of deposit

Only once


What should you choose?

Now comes the main question about which is better RD or FD. Choose between recurring deposit vs fixed deposit based on these 2 factors:

1. Your commitment towards investing- FD vs RD

Depending on how long you can continue investing for, you can decide between a recurring deposit vs fixed deposit. If you can invest for a period of at least 6 months, an RD would suit you best. However, if you cannot invest for that long, an FD should suit you better.

2. You financial capabilities- FD vs RD

Your financial health is also a crucial factor to consider when it comes to choosing between an FD and RD. If you are in a financial position to make a one-time investment, FD would be a good choice. If you are comfortable with investing small amounts of money on a recurring basis, an RD would fit your financial health better. Another useful tool while making such financial decisions is Fixed Deposit calculator which helps you calculate returns basis the rate and tenure for a principal amount


  • ✔️Is there a special rate for senior citizens?

    Most banks offer a special rate for senior citizens, However, the rates may vary so compare recurring deposit vs fixed deposit rates accordingly.

  • ✔️Is it possible to take a break from FD before maturity?

    Yes, you can take a break. You can either take a break or withdraw your amount partially with a penalty in an FD vs RD allowing the same but with lesser penalty.

  • ✔️Can I make partial withdrawal from my RD before its maturity period?

    No, you cannot withdraw partially before maturity from RD vs FD allowing such withdrawals subject to applicable penalties. 

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