If there is confusion about FD and RD, then both the options should be studied thoroughly. One should calculate the returns on these and then choose an option as per your convenience.
Investment Tips: The financial year has changed, investment planning has to be done for the new year. Or if you have recently started your professional life and are looking for a safe option to invest, then people will advise you to open an RD or FD in the bank. Certainly RD means Recurring Deposit and FD means Fixed Deposit, both are good plans for safe investment. You can also use them during emergency.
Now the problem comes that which one to choose, FD or RD. If there is confusion about FD and RD, then both the options should be studied thoroughly. One should calculate the returns on these and then choose an option as per your convenience.
Fixed deposits are a good option if you have a lump sum amount and want to earn returns with low risk.
Fixed deposit
Fixed Deposit – FD is an easy and safe way of saving. In this, money is invested in a bank or any finance company for a fixed time. Banks or financial institutions give us a fixed interest in return. When the tenure of the FD is over, our deposits mature. FD also has two options – Cumulative interest and Non-cumulative interest. In FD with cumulative interest, you get principal and compound interest on maturity. FDs with non-cumulative interest have the option to keep withdrawing the interest at regular intervals like monthly or quarterly basis. You can invest in fixed deposits from 7 days to 10 years.
FDs have the option of a five-year tax-saving FD to save tax under Section 80C of Income Tax.
Advantages of RD
Recurring deposit is a monthly savings plan at a fixed rate of interest for a fixed period of time. In this too, like RD, interest is available on maturity. The rate of interest remains the same throughout the tenure as at the beginning of the RD. In RD, a certain amount is withdrawn every month from your bank account. Unlike FDs, there is no tax saving option in this.
RD is the best option for small savings. For those who do not have lump sum amount for investment, RD is a good way. But less interest is available in RD as compared to FD.
Choose what
When choosing between FD or RD, see how much money you have for investment. If you have a large corpus with a fixed tenure, then you can choose FD. You can get more profit in this. If you want to invest a fixed amount every month, then RD is a better option for you.
