Recurring Deposit (RD) Interest Rates in India

What is Recurring Deposit?

Recurring deposits are among the most popular risk-free investing options in India. For those with steady earnings, an RD is an investment vehicle in which a certain sum of money is added to the account each month for a predetermined period of time. By creating an RD account, one can receive an interest rate that ranges from around 2.50% to 8.50%. Interest rates on RDs are comparable to those on fixed deposits, but what sets RDs apart is the monthly payment flexibility. A fixed deposit might have a minimum term of six months or ten years.

RD Interest Rate 2024

Benefits of Recurring Deposit (RD)

• Safe Investment: There is extremely little to no risk associated with recurring deposits. To make sure your money is protected, choose a bank that is reliable and secure.
• Flexible Investment: You can choose the monthly investment amount that best fits your budget.
• Compound Interest: RDs yield compound interest, which helps increase your profits.
• Financial Discipline: Since RDs require regular contributions, they encourage you to save regularly.
• Loan Facility: Many banks allow you to take loans against your RD account.

Disadvantages of Recurring Deposit (RD)

• Limited Liquidity: Money is locked in for the entire term, which might be a disadvantage in emergencies.
• Lower Returns Compared to Market: RD rates are often lower than other investment avenues like stocks or mutual funds.
• Penalties for Early Withdrawal: Premature withdrawal may incur penalties, reducing the overall interest earned.

Taxation on Recurring Deposits 

The interest earned from recurring deposits is subject to taxation. It is added to the total taxable income and taxed as per the applicable income tax slab. No tax is deducted at source (TDS) on the interest earned if the total interest income is below Rs 40,000 (Rs 50,000 for senior citizens). For individuals whose total interest income exceeds these limits, TDS is deducted at the rate of 10% if the PAN is provided; otherwise, it is deducted at 40%.

Types of Recurring Deposits

• Regular RD: This is the most common type, where a fixed amount is deposited regularly.
• Monthly Income Scheme (MIS): Some banks offer RDs that provide monthly interest payouts, ideal for those looking for regular income.
• Special RDs: Some banks offer themed RDs with special interest rates during festivals or occasions.
• Online RD: Online banking allows for the opening and management of RDs without visiting a bank branch.

Conclusion

An RD calculator is a useful tool that helps individuals estimate the maturity amount of their recurring deposit account by inputting details such as deposit amount, interest rate, and tenure. A recurring deposit account allows you to invest a fixed amount monthly, earning interest at a predetermined rate, making it a secure and disciplined way to save.