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What Is a Recurring Deposit (RD)?

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🏦 What Is a Recurring Deposit (RD)?

A Recurring Deposit (RD) is a savings option offered by banks and post offices where you deposit a fixed amount every month and earn interest on it. It’s perfect for those who want to build savings slowly and steadily without any market risk.

📅 How Does an RD Work?

Let’s say you decide to deposit ₹1,000 every month for 2 years. Each monthly deposit earns interest, and by the end of the tenure, you get your total deposit + accumulated interest.

Example:

  • Monthly deposit: ₹1,000
  • Tenure: 24 months
  • Interest rate: 6.5% per annum (compounded quarterly)

At maturity, you’ll get around ₹26,662 — ₹24,000 deposit + ₹2,662 interest.

💰 Key Features of RD

  • ✔️ Safe and risk-free investment option
  • ✔️ Fixed interest rate throughout the tenure
  • ✔️ Tenure ranges from 6 months to 10 years
  • ✔️ Monthly deposit amount can start as low as ₹500

📈 Interest Rates in RD

Interest rates vary from bank to bank. As of now, most banks offer between 5.5% to 7.5% per annum based on tenure and age (senior citizens get higher rates).

📝 How to Open an RD Account?

  • 🏦 Visit your bank branch or open it online via net banking or mobile app.
  • 💳 Link it with your savings account for auto-debit every month.
  • 🧾 Choose amount and tenure, and you’re good to go!

🔄 Can You Withdraw Early?

Yes, but you may get a lower interest rate and have to pay a small penalty. It’s best to stay invested till maturity to get full benefits.

🧮 Tax on RD Interest

Interest earned is taxable under "Income from Other Sources". If total interest in a year exceeds ₹40,000 (₹50,000 for senior citizens), TDS is applicable.

👶 Who Should Invest in RD?

  • ✅ Beginners who want a safe start
  • ✅ Students or salaried individuals saving monthly
  • ✅ Those who want guaranteed returns without market risk

✅ Final Thoughts

RD is an excellent tool to develop a saving habit. It's safe, simple, and gives assured returns. If you’re a beginner in your financial journey, RD can be a great way to park your money and grow it gradually.

📚 Join my Telegram channel for educational stock market insights and research:
👉 https://t.me/Investtrade_by_Ankit

⚠️ This is for learning purposes only. Please do your own research before making any investment decisions.

Written by @nkit

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