FD vs RD Guide India

FD suits lump sum money

A fixed deposit is usually useful when you already have a lump sum and want predictable interest over a chosen tenure.

It can be used for short-term goals, emergency backups, or conservative savings, but premature withdrawal rules should be checked.

RD suits monthly saving discipline

A recurring deposit helps users save a fixed amount every month. It is useful when you do not have a lump sum but want a predictable maturity amount.

RD returns can differ from FD returns because each monthly deposit earns interest for a different number of months.

Tax can reduce effective return

Interest from deposits may be taxable based on income slab and applicable rules. Always compare post-tax return, not only the advertised rate.

If the money is needed soon, liquidity and safety may matter more than a slightly higher return.

Worked example: FD versus RD for a short goal

If you already have Rs 3 lakh, an FD at 7% for 5 years with quarterly compounding could grow to about Rs 4.24 lakh. If you are saving Rs 5,000 a month instead, a 5-year RD at 7% would put in Rs 3 lakh and return roughly Rs 3.6 lakh.

The FD earns more because all the money is invested from day one. The RD is useful when the money comes from monthly income rather than a lump sum.

Frequently asked questions