Recurring Deposit

Banking

Quick Definition

A Recurring Deposit (RD) is a savings scheme offered by banks where you deposit a fixed amount every month for a specified period and earn interest on it.

Detailed Explanation

A Recurring Deposit is ideal for individuals who want to build savings gradually through regular monthly deposits. Instead of investing a lump sum (like in FD), you contribute a fixed amount every month and earn compounded interest over time.

Key Features of RD

  • Fixed monthly deposit amount
  • Flexible tenure (usually 6 months to 10 years)
  • Guaranteed returns with fixed interest rate
  • Interest compounded quarterly (in most cases)

Benefits

  • Encourages disciplined saving habit
  • Suitable for salaried individuals and beginners
  • Safe investment with predictable returns
  • Helps achieve short- to medium-term goals

Taxation

Interest earned on RD is taxable, and TDS may apply as per rules of the Income Tax Department of India.

RD is perfect for those who want to save small amounts regularly and build a lump sum over time without market risk.

Example

"If you deposit ₹5,000 every month in an RD for 2 years at 7% interest, you will receive a lump sum amount with interest at maturity."

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