What’s the Difference Between FD and RD?

What’s the Difference Between FD and RD?

Saving money is very important as it gives you financial security and helps you in an emergency situation. Bank deposits are one of the easiest ways to save money. In India, two types of deposits have been very popular for a long time – Recurring deposits and fixed deposits. They have a high rate of return as people earn a substantial amount on their savings. There are specific facts about these deposits that make them suitable for different investors. 

What is a Fixed Deposit?

Also known as term deposits, a bank fixed deposit is the most popular and safe way of investing. Opening a fixed deposit is quite easy and offers safe returns. It involves depositing a certain amount in the bank at some agreed interest rate. The interest on fixed deposits is relatively higher than other types of deposit schemes. At the end of the maturity amount, you get your investment amount with the added compound interest. 

What is a Recurring Deposit?

Recurring deposits refer to the investment tools where people deposit a certain amount of money on a regular basis. The rate of earning interest in these deposits is the same as fixed deposits. A recurring deposit is suitable for people with a steady source of income. These deposits provide flexibility and ease as they include regularly depositing a particular sum. Recurring deposits are generally of two types- Regular and Flexi deposits. 

Difference Between Fixed Deposit and Recurring Deposit 

While both these investments offer a great return to the investors, they are different in many ways. The following are a few things that can help you differentiate between a recurring deposit and a fixed deposit:

Eligibility Criteria

Fixed Deposit

In case of a fixed deposit, the investor must be a citizen of India or of Hindu Undivided Families.

Recurring Deposit

To be eligible to open a recurring account, a person must be an Indian citizen or a member of the Hindu Undivided Families. 

Way of investment

Both recurring deposits and fixed deposits help people earn interest on investments. Fixed deposits allow investment of any idle cash for a particular time period.

Recurring deposits require a predetermined amount of investment every month.

Tenure of Investment

The minimum tenure of a fixed deposit is seven days, while it can be done for a maximum tenure of 10 years.

A recurring deposit can be made for a minimum period of 6 months. The maximum time for which you can make such a deposit is ten years. 


In the case of a fixed deposit, the option for auto-renewal exists. It can be renewed either on the principal amount or the amount, including interest. 

In case of a recurring deposit, the investment can not be auto-renewed.

Payment of Interest

The interest on fixed deposit is given to the investor either on a monthly or on a quarterly basis.

In a recurring fixed deposit, there is no option of payment of interest on a monthly or quarterly basis.

Amount of Investment

The most crucial difference between FD and RD is the minimum investment amount. While this minimum amount varies from bank to bank, the necessary amount to be invested remains the same. In a fixed deposit, the minimum amount that a person needs to invest in a fixed deposit is Rs 5,000. There is no limit on the maximum amount of investment that he wants to make.

In case of a recurring fixed deposit, a person needs to invest a minimum amount of Rs 500. There is no maximum limit on the amount of investment.

Tax Benefits

In case of a fixed deposit, there is a scope of tax exemption. This is applicable under the Income Tax Act of 1961. Under Section 80C of the act, investors can get a deduction on taxes that they have to pay on their investment.

In recurring deposits, income tax is applicable in case the interest earned is more than Rs 10,000 a year.


Opening a fixed deposit requires the applicant to have an identity proof along with address proof. He/she also needs to submit his passport, PAN card, and other income proofs.

One needs to submit the same documents in case of opening a recurring account.

How to open a Fixed Deposit or Recurring Deposit Online?

How to open a Fixed Deposit account?

Opening a fixed deposit account is not complicated. First, you must log in to your account with which you use net banking. Then, select ‘Transact’ and then choose the option ‘Open Fixed Deposits’. The next step is to choose an appropriate branch, tenure and amount. The last step is to appoint a nominee and then click on ‘Continue.’

How to Open a Recurring Deposit Account?

Opening a recurring deposit is a hassle-free process. It does not require any added documents. A person just needs to have a savings account with active net banking. The application can be made in online mode. You need to log in to your account using net banking. Thereby choose the option of Recurring Deposit. You need to further provide your details, including the investment amount and the tenure for which you want to deposit the money. After completing this, you need to link this account with your savings account.


Though a fixed deposit and recurring deposit help an individual invest money to earn good returns, there are some differences in terms of features. Therefore, it is important that an individual understands the difference between both the investment options and go for the one that matches their needs. 

About the Author: Zack Walker

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