RD vs FD: Difference, Returns, Which is Better?

Recurring Deposit (RD) and Fixed Deposit (FD) are two of the most popular investment options offered by banks. Both are safe and provide guaranteed returns, but they work in different ways.

What is RD?

Recurring Deposit (RD) allows you to invest a fixed amount every month for a specific period. It is ideal for people who want to build savings gradually.

What is FD?

Fixed Deposit (FD) allows you to invest a lump sum amount for a fixed tenure at a predetermined interest rate. It is best suited for people who already have a large amount to invest.

Difference Between RD and FD

RD vs FD Returns Example

Let’s compare returns:

• RD: ₹5,000 per month for 2 years at 7% interest
• FD: ₹1,20,000 lump sum for 2 years at 7% interest

FD usually generates slightly higher returns because the full amount is invested from the beginning, while RD builds gradually.

Advantages of RD

• Easy monthly savings habit
• No need for a large initial amount
• Good for salaried individuals

Advantages of FD

• Higher returns compared to RD
• Flexible tenure options
• Loan facility available against FD

RD vs FD: Which is Better?

Choose RD if:

• You want to save monthly
• You do not have a lump sum amount

Choose FD if:

• You have a large amount to invest
• You want higher returns

Tax on RD and FD

Interest earned on both RD and FD is taxable as per your income tax slab. Banks may deduct TDS if interest exceeds the prescribed limit.

Frequently Asked Questions

Which is better RD or FD?
FD is better for lump sum investment, while RD is better for monthly savings.

Is RD safer than FD?
Both RD and FD are equally safe as they are offered by banks.

Does FD give higher returns than RD?
Yes, FD usually gives slightly higher returns.

Can I withdraw RD or FD early?
Yes, but a penalty may apply.