Top News

There are two most popular options for those who save in the bank - Fixed Deposit (FD) and Recurring Deposit (RD). In FD, a lump sum amount is deposited in the bank, whereas in RD (FD vs RD), it is deposited in small installments every month.

Usually, people think that the interest rate in both is almost equal, so the return will also be equal, but the reality is something else. So let's understand the complete calculation in five questions.

1. How is money deposited in an FD and an RD?

In FD, you deposit a lump sum amount in the bank at once, and get interest on it for a fixed time. Whereas in RD, a fixed amount is deposited every month. Like EMI, interest is received on each installment at a different time.

2. How is interest calculated?

In FD, interest is charged on the entire amount for the entire time, so the earnings are higher. In RD, each installment starts earning interest from a different date, due to which the total interest is slightly less.

3. How much return will you get from FD and RD in five years?

Suppose the annual interest rate is 7 percent. And if you keep one lakh rupees in an FD for 5 years, then you will get around Rs 1,40,255. Whereas if you deposit Rs 1,666 every month (total 1 lakh) in RD for 5 years, then it will become around Rs 1,19,500. That means about Rs 20,700 more profit in FD.

Aspects FD (Lump sum) RD (Monthly)
Deposit method: One-time Monthly
Total investment ₹1,00,000 ₹1,00,000
Interest rate 7% p.a. 7% p.a.
Time 5 years 5 years
Maturity amount ₹1,40,255 ₹1,19,500
Profit ₹40,255 Interest ₹19,500 Interest
Difference ₹20,755 -------

4. Which one to choose FD or RD?
If you have a lump sum amount, then you will get more interest than FD. And if you can save a little every month, then RD is right.

5. What is the difference in tax?
Experts believe that the interest received on both is taxable. And the bank can also deduct TDS, if the interest exceeds the prescribed limit. The tax impact will also be slightly higher on higher returns.

Disclaimer: This content has been sourced and edited from Dainik Jagran. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.