Earn interest up to 8.60% p.a. by investing in a Bajaj Finance Fixed Deposit | Rated CRISIL AAA/ STABLE and [ICRA]AAA(stable) Invest Now

When looking to earn stable returns from your investment, fixed deposits and recurring deposits are two options you can consider. That said, there is quite a bit of a difference between FD and RD. 


Knowing these differences will help you understand and decide which is better, RD or FD. It will let you make an informed decision and ensure the secure growth of your finances. Read on to know more about both these options and find out which one is a better fit for you. 

Comparison Between Fixed Deposit and Recurring Deposit

If you are wondering which is better, looking at the differences between FD and RD in the table below can give you clarity. 


Fixed Deposits 

Recurring Deposits

Deposit Frequency

Only once during the entire tenor

Each month till the end of the tenor


7 days to 10 years

6 months to 10 years

Minimum Investment



Ideal For

Investors wishing to make a lump sum investment 

Investors wanting to invest small sums of money regularly 

Tax Benefits

With 5-year tenor FDs, you can claim the invested amount as a deduction under Section 80C of the Income Tax Act, 1961, up to ₹1.5 Lakhs in a financial year

Recurring deposits do not offer any tax benefits

Interest Payout

Receive the interest from an FD on a monthly, quarterly, half-yearly or annual basis or at maturity

Paid out at the time of maturity

Renewal Facility


Not available

FD vs RD

Difference between FD and RD

Difference between FD and RD

The foremost difference between FD and RD is when you have to deposit the investment amount. While you have to deposit a lump sum in one go with an FD, the deposits are made every month if you opt for an RD.


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


Now, some issuers also offer a way for you to invest in FDs on a monthly or recurring basis via Systematic Deposit Plans. Given this, it is important to compare FD and RD before investing. This way, you can ensure the investment meets your current and future financial goals. 

RD or FD: Which is Better?

Assuming that FD and RD provide the same rate of 7.2%, this table provides the returns you can earn from both investment tools. See the results below to decide which investment option may be ideal for you.

Tenor (a)

Fixed Deposit Amount (b)

Interest Earned on FD (7.2% p.a.) (c)

FD Maturity Amount (d)

Recurring Deposit Amount p.m. (e)

Interest Earned on RD (7.2% p.a.) (f)

RD Maturity Amount

Difference (c-f)

1 Year








2 Years








3 Years








4 Years








5 Years








FD vs RD - Which Investment Gives You More Return?

As you can see in the table above, an FD provides higher returns than an RD, even if both offer the same interest rate. The difference between the returns from an RD and an FD was only ₹829 for a year of investment. 


However, as the investment tenor increases, the margin between the returns from RD and FD also grew larger. At the end of 5 years of investment, the difference stood at ₹27,021. This means that FD returns were almost twice the returns offered by RD. 



Facilities offered in FD and RD

Now that you have seen the difference between FD and RD, take a look at the common facilities offered with these investment vehicles.

  • Mode of Operation

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

  • Nomination Facility 

Both FDs and RDs offer the facility to nominate an individual for your account. This 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 and recurring deposits either individually or jointly with other individuals. Both investment options allow you to add up to 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 or family members. This enables you to save for their future. For example, if either of the accounts is under your child’s name, they can use it to cover higher education costs. 

FD and RD Taxability

As far as taxability is concerned, both fixed and recurring deposits are very similar. The interest you receive from an FD and an RD is fully taxable. The rate of tax depends on the income tax slab rate you fall under. 


For instance, if you fall under the 20% slab rate, the tax rate for interest earning will be 20%. That’s not all. For FD and RD, the financial institution is obliged to deduct 10% TDS if the total yearly interest earned exceeds ₹40,000. This is ₹50,000 for senior investors.


However, in terms of taxability, FD and RD differ in one aspect. In the case of a tax-saving FD or an FD with a 5-year tenor, you can claim tax benefits under the Income Tax Act. 


The invested amount can be claimed as a deduction from your gross income under Section 80C of the Income Tax Act, 1961. The maximum amount of deduction available is ₹1.5 Lakhs in a financial year. 


However, this is not available for a recurring deposit, giving fixed deposits a huge edge in the FD vs RD debate.

What Should You Choose - RD or FD?

You can choose between FD and RD based on your financial capabilities and requirements. For instance, if you wish to earn higher returns, there is no doubt that you should go with FD. 


On the other hand, if you do not have a significant sum to invest in an FD, you can choose RD. With an RD, you only have to make recurring payments, so you do not need a large amount for investment in one go. 


Thirdly, if your main purpose of investment is tax saving, you can opt for a tax savings FD. 


The tax-savings FD allows you to enjoy tax benefits of up to ₹1.5 Lakhs in a financial year.


However, this FD type lacks liquidity and comes with a lock-in period of 5 years.


Also, you can use an FD monthly interest calculator to determine the returns you would receive monthly on your investment. You can save the time you spend manually calculating the interest using this online tool.


 The information provided by BFDL herein above is related to the Non-Partnered Banks/ NBFCs and is just for the purpose of information and under no circumstances the information provided hereinabove is intended to be source of advice or recommending any financial investment advice or endorsement of any sort.

The information including interest rates with regard to fixed deposit, provided on this website is gathered through publicly available sources over the internet and is considered as accurate and reliable to the best of our knowledge. BFDL disclaims any responsibility or liability regarding inaccuracies, omissions, mistakes etc. as well as offers by the Non-Partnered Banks. The use of information set out is entirely at the User’s own risk and User should exercise due care prior taking of any decision, on the basis of information mentioned hereinabove. You are advised to visit/ contact the respective Banks/ NBFCs to verify the information before making any investment or opening an account. Further, BFDL does not undertake any responsibility or liability to update this information. YOU ARE SOLELY RESPONSIBLE FOR ANY LIABILITY OR DAMAGE YOU INCUR THROUGH ACCESS TO OR USE OF THE SITE OR SUCH INFORMATION OR MATERIALS EXCEPT WHERE THE LAWS AND REGULATIONS OF A PARTICULAR JURISDICTION CONCERNING WARRANTIES CANNOT BE WAIVED. Additionally, display of any trademarks, tradenames, logo and other subject matters of intellectual property owners. Display of such Intellectual Property along with the related product information does not imply BFDL’s partnership with the owner of the Intellectual Property of such products. 

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FAQs on FD vs RD

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

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

Once you book a fixed or a recurring deposit, any change in the interest rates will not matter. You will continue to enjoy the same FD and RD interest rates at the time of booking. The new rates will only be applicable for new deposits.

In the case of fixed deposits, premature withdrawal of FD is permissible but financial institutions usually levy a small penalty. You may also earn at a lower interest rate when you withdraw earlier than your chosen tenor . For recurring deposits, however, premature withdrawal is not permitted for the first three months except in the case of the death of the investor.

You cannot renew a recurring deposit. Upon maturity, the principal amount, along with 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.

No, RD and FD interest rates are not the same. The rates for both these investment options depend on various factors, such as the tenor and investment amount. Additionally, FD and RD interest rates also vary for each issuer.

If you compare PPF vs RD vs FD interest rates, PPF interest rates are often higher. Additionally, with PPF, you receive tax advantages on your invested amount, interest, and maturity value. However, in the unfortunate event of death, investments in PPF would halt. 


The PPF return would then be determined by the amount invested up until the investor's demise. But, in the case of guaranteed or fixed return plans, the nominee receives the entire maturity value even if the investor dies prematurely.

No, RD rates depend on various factors like the age of the investor, the amount of investment, and the investment tenor. Moreover, most banks and NBFCs offer higher interest rates to senior citizens. 

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