Earn interest up to 7.95% p.a. by investing in a Bajaj Finance Fixed Deposit | Rated CRISIL AAA/ STABLE and [ICRA]AAA(stable)

If you’re interested in receiving stable returns from your investment, fixed deposits and recurring deposits are two options that you can consider investing in. That said, there is quite a bit of a difference between an FD and an RD. Continue reading to get to know more about both of these investments and find out which one’s the better fit for you. 

What is a Fixed Deposit?

Offered by both banks and Non-Banking Financial Corporations (NBFCs), a fixed deposit is an investment option that’s designed to provide guaranteed returns. Here, you’re required to deposit a certain sum of money with a financial institution for a specified period of time. In exchange, the financial institution offers interest at a particular rate on the deposited amount. 


On the expiry of the said period of time, the deposited amount along with the interest that it gathered during this period is paid out to you. Some financial institutions also give you the option to receive the interest on the deposit periodically instead of receiving it only on maturity. 


Usually, the tenor of a typical FD starts as low as 7 days and goes all the way up to 10 years. The FD interest rate applicable to you is dependent on various factors such as the financial institution, the amount of deposit and the tenor.

Features of Fixed Deposit

  • The rate of interest offered by a fixed deposit is usually higher than that of a savings account.

  • The minimum tenor of a fixed deposit is 7 days, whereas the maximum tenor that you can opt for is 10 years. 

  • The application and renewal process of an FD is easy and hassle-free. Many financial institutions allow you to apply for a fixed deposit online. 

  • The fixed deposit can be prematurely withdrawn at any point in time. However, financial institutions usually levy a small penalty in such cases. 

Benefits of Fixed Deposits

  • The returns that you get from fixed deposits are stable, guaranteed, and unaffected by any market fluctuations. 

  • Fixed deposits are flexible. You have the freedom to choose the investment amount and the tenor for which you would like to deposit it for. 

  • You can open multiple fixed deposit accounts with the same financial institution or with multiple institutions. There’s no restriction on the number of FDs that you can have. 

  • One of the major benefits of an FD is that you can claim tax deductions of up to ₹1,50,000 in a financial year under Section 80C of the Income Tax Act, 1961. However, this is only applicable on tax-saving FDs with a fixed tenor of 5 years. 

What is a Recurring Deposit?

A recurring deposit (RD) is another investment option offered by both banks and NBFCs. Here, you’re required to invest a specific amount regularly, usually on a monthly basis, for a specific period of time. The interest is calculated each month, but is only credited to you on maturity of the RD along with the invested amount. As with an FD, the interest rate of a recurring deposit also remains the same throughout the tenor and is unaffected by any changes in the market rates. 

Features of Recurring Deposit

  • The rate of interest on a recurring deposit varies depending on the financial institution that you opt for. Usually, the rates are between 5% - 8%.

  • You don’t need to invest a lump sum amount to start an RD. In fact, the minimum amount of investment required to create a recurring deposit is just ₹100 per month.

  • The minimum tenor of investment for an RD is 6 months, whereas the maximum tenor is 10 years.

  • Premature withdrawal is only allowed after the expiry of 3 months from the date of opening of the account. Also, a small penalty will be levied for premature account closure. 

Benefits of Recurring Deposit

  • Since the minimum amount of investment in an RD is low, it is suitable for all kinds of investors.

  • The tenor of investment is flexible, allowing you to choose the one that you’re most comfortable with. 

  • The rate of interest for recurring deposits is higher than that offered by a savings account and is almost on par with fixed deposit rates. 

Key Difference between Fixed Deposit and Recurring Deposit

If you’re wondering which is better, RD or FD, taking a look at the differences between these two investment options can help give you some clarity. 


Fixed Deposits 

Recurring Deposits

Deposit Frequency

You will only have to make a deposit once during the entire tenor.

You will have to deposit the chosen sum each month till the end of the tenor. 


The tenor for an FD ranges from 7 days and goes up to 10 years.

The tenor for an RD starts from 6 months and goes up to 10 years.

Minimum Investment

The minimum amount of deposit in an FD is ₹1,000. 

The minimum amount of deposit in an RD is ₹100. 

Ideal For

Investors who wish to make a lump sum investment can choose to invest in an FD. 

Investors who wish to invest small sums of money regularly can opt to invest in an RD.

Tax Benefits

With 5-year tenor FDs, you can claim the investment amount as a deduction under section 80C of the Income Tax Act, 1961. The maximum amount of deduction is limited to ₹1.5 Lakhs in a financial year. 

Recurring deposits don’t offer any kind of tax benefits.

Interest Payout

You can choose to receive the interest from an FD on a monthly, quarterly, half-yearly, annually, or at the time of maturity. 

The interest is only paid out at the time of maturity.

Renewal Facility

Renewal facility is available for FDs. 

Renewal facility is not available for RDs. 

FD vs RD

Facilities offered in FD and RD 

Now that you’ve seen the various FD and RD differences, let’s take a look at the facilities offered by both of these investment options. 

  • Mode of Operation 

You can open both fixed deposits and recurring deposits online from the comfort of your own home by using the internet banking facility. Alternatively, you can also open them through the offline mode by visiting the nearest branch as well. 

  • Nomination Facility 

Both FDs and RDs offer the ability to nominate an individual for your account. Nomination makes it easy for your beneficiaries to claim the proceeds from your account in the event of your demise.  

  • Joint Holding Facility

You can open fixed deposits and recurring deposits either singly or jointly with other individuals. Both investment options allow you to add up to a maximum of three holders, including yourself. 

  • Ability to Open Accounts for Family Members

FDs and RDs allow you to open accounts in the name of other individuals like your family members for instance. This enables you to save up for your family member’s future. For instance, you can open an FD in your child’s name, which the child can use for covering their higher education costs once they grow up. 

FD Vs RD: Which One's for You?

If you still haven’t gotten a clear answer to ‘RD or FD, which is better’, here’s something that can help you out. Let’s take a look at an example of a fixed deposit and a recurring deposit to see which one fits your requirements better. 

  • Fixed Deposits

Let’s say that you wish to invest an amount of ₹36,000 in an FD with an interest rate of 6.5%. The interest and maturity amount that you’re likely to get from this investment for different tenors are as follows. 


Principal Investment 

Interest Earned

Maturity Amount

1 year




3 years




5 years




  • Recurring Deposits

Now, let’s say that you wish to invest ₹3,000 monthly in an RD at the same interest rate of 6.5%. The interest and maturity amount that you’re likely to get from this investment for the same tenors are as follows.


Principal Investment 

Interest Earned

Maturity Amount

1 year




3 years




5 years




Difference between FD and RD

Difference between FD and RD

As you can see, although the FD vs RD interest rates in this example are the same, the interest that they earn are vastly different. The interest from FD is significantly higher than that of an RD for the first year. This is due to the fact that you invest a lump sum amount in an FD as opposed to monthly deposits spread out over a year in an RD. 


However, as the tenor increases, the interest from RD far surpasses that of an FD. This is due to an increase in the principal amount of investment due to the regular monthly contributions that you make towards a recurring deposit. 


To sum up, investing in a fixed deposit may seem more beneficial for individuals who can invest a lump sum amount. On the other hand, investing in a recurring deposit is more beneficial for individuals who prefer investing small amounts in regular intervals. 


Therefore, before you decide to invest, always compare FD vs RD to always ensure that they meet your financial needs and goals. 

FD and RD Taxability 

As far as taxability is concerned, both fixed deposits and recurring deposits are very similar to one another. The interest that you receive from both an FD and an RD is fully taxable in your hands. The rate of tax is dependent on the income tax slab rate that you fall under. For instance, if you fall under the 20% income tax slab rate, the interest on FD and RD will be taxed at 20%. 


That’s not all. In the case of both fixed deposits and recurring deposits, the financial institution is obliged to deduct TDS at the rate of 10% if the total amount of interest earned in a year exceeds ₹40,000 in a financial year. 


However, there’s a huge difference between FD and RD in terms of taxability in one aspect. In the case of a tax-saving FD or an FD with a 5-year tenor, you can claim the amount of investment as deduction from your total taxable income under section 80C of the Income Tax Act, 1961. The maximum amount of deduction available is limited to ₹1.5 Lakhs in a financial year. Such a kind of tax benefit is unfortunately not available for a recurring deposit, giving fixed deposits a huge edge in the FD vs RD debate. 



  • ✔️What is the deposit frequency for recurring deposits and what are the payment modes available?

    A recurring deposit is usually offered with only one following deposit frequency - monthly and is usually debited directly from the savings bank account linked with the deposit.

  • ✔️Can recurring deposits be made in joint names?

    Yes. You can choose to open a joint recurring deposit with either one other individual or two individuals. However, the first holder would be the one responsible for making deposits on time and also gets to enjoy the maturity amount. 

  • ✔️What happens to the interest rates of FDs and RDs, if the existing interest rates increase or decrease?

    Once you open a fixed deposit or a recurring deposit, any changes in the interest rates won’t matter. You will continue to enjoy the same FD and RD interest rates that were there during the time of creation of the deposit. The new rates will only be applicable for new deposits.

  • ✔️What is the cause of premature withdrawal in the case of FDs and RDs?

    In the case of fixed deposits, premature withdrawal of FD is permissible. However, financial institutions usually levy a small penalty. In the case of recurring deposits, however, premature withdrawal is not permitted for the first three months from the date of creation except in the case of death of the investor.

  • ✔️How can I renew my RD?

    You cannot renew a recurring deposit. Upon maturity, the principal amount along with the interest accrued on it will be credited to your savings bank account. That said, you can also choose to convert the maturity proceeds of an RD into an FD upon maturity too.

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