Recurring Deposit

Recurring Deposit

Recurring Deposit (RD) is one of the popular investment plans in India which offers flexibility in investment, tenure, and many other benefits. In RD accounts the depositor must deposit money at regular intervals, this account can be either opened at banks or post offices, as it is maintained by the government organizations it offers good security for the depositor.

Key Points

  • The mode of investment is monthly.
  • Only banks and post office offer this scheme
  • The tenure range varies from 6 months to 10 years
  • The minimum amount of investment in the RD account starts from Rs 100
  • All Indian residents can invest in RD Schemes
  • NRI's can also open RD via NRE accounts only in banks but not in Post-office.
  • When the individual does not have a lump sum amount for investment, then Recurring Deposit is a great option.

Where to open recurring Deposit accounts?

  • Banks or Post office
  • Minimum amount of investment Rs 100 in banks and Rs 10 in post office
  • Tenure minimum 6 months or Maximum 10 years

What are the documents required for the RD account?

  • PAN/Aadhaar cards
  • Residential Proof
  • Identity proof

What are the types of Recurring Deposits?

Recurring Deposits for Senior Citizens:

  • Offers higher interest rates
  • Interest rates compounded quarterly for the applicable interest rate
  • Offers higher returns after maturity

Recurring Deposits for NRI/NRE in India

  • NRI can invest in RD schemes either through NRE or NRO accounts.
  • RD through NRO accounts - 30% taxable
  • RD through NRE accounts - Not taxable

Flexi Recurring Deposits

  • This offers a flexible investment option to the depositor
  • Based on the investment duration the interest rate is calculated
  • The investor must deposit the pre-fixed core amount in multiples (investment flexibility is available).

Recurring Deposits and Renewals

Premature Withdrawals-

  • 1% withdrawal penalty is levied
  • Not eligible for additional incentives if applicable

Partial Withdrawal-

  • Banks do not allow for Partial withdrawals
  • Post office will allow if the account has maintained for 1 year.

Advantages of Recurring Deposit Schemes

  • Flexible investment option
  • TDS not applicable
  • Interest rates gain
  • Risk-free investment option
  • To fulfill both short-term and long-term goals

Bottom Line

Recurring Deposit investment scheme is one of the best options to invest money especially when you do not have lumpsum amount to invest, but when you have enough money to invest then FD scheme will be better than RD, as FD offers higher interest rates than RD scheme.