Frequently Asked Questions (FAQs)
What is a Fixed Deposit (FD)?
A Fixed Deposit (FD) is an investment where you deposit a lump sum amount with a bank or financial institution for a set period. You earn a fixed interest rate on your deposit over the chosen term. The best part is that the returns are guaranteed and not affected by market changes.
What is a Recurring Deposit (RD)?
A Recurring Deposit (RD) allows you to save a fixed amount each month. The amount you deposit earns interest at a fixed rate over a period. It's a great way to save if you have a steady income and want to build savings gradually.
How do Fixed Deposits work?
In an FD, you deposit a lump sum amount for a fixed period. You earn interest on this amount, and at the end of the term, you get the principal plus the interest. The interest rate remains the same throughout the term.
How do Recurring Deposits work?
In an RD, you deposit a fixed amount every month for a set period. The total amount you save earns interest, and after the term ends, you receive the total amount along with the interest.
What's the difference between Fixed Deposits and Recurring Deposits?
Feature
Fixed Deposit (FD): One-time lump sum deposit
Recurring Deposit (RD): Monthly deposits
Tenure:
FD: Flexible, from 7 days to 10 years
RD: Fixed, typically 6 months to 10 years
Interest Rates:
FD: Generally higher
RD: Slightly lower than FD rates
Withdrawal:
FD: Can be withdrawn early, with penalties
RD: Can be closed early, but no partial withdrawals allowed
Best For:
FD: People with a lump sum to invest
RD: People who want to save regularly every month
Are the interest earnings from FD and RD taxable?
Yes, both FD and RD interest are taxable. You will pay tax on the earnings based on your tax slab. If the interest exceeds a certain limit, tax will be deducted at source (TDS).
Can I withdraw funds from my FD or RD before maturity?
FD: Yes, you can withdraw early, but there may be penalties, and you may earn less interest.
RD: You can close an RD early, but it usually comes with penalties, and you can’t make partial withdrawals during the term.
What happens if I miss a monthly RD deposit?
If you miss a monthly deposit, there may be penalties or the RD could be treated as closed. It’s best to ensure you make the deposit on time to avoid such issues.
Can I get a loan against my FD or RD?
Yes, many banks offer loans against FDs. You can usually borrow up to a certain percentage of your FD amount at a fixed interest rate. Loans against RDs are less common but may be available in some cases.
Can I save tax with Fixed Deposits?
Yes, you can save tax by investing in Tax-Saving Fixed Deposits, which have a 5-year lock-in period. They allow you to claim deductions under Section 80C of the Income Tax Act, though the interest earned is still taxable.
Which is better: Fixed Deposit or Recurring Deposit?
Fixed Deposit: Ideal if you have a lump sum amount to invest and want guaranteed returns.
Recurring Deposit: Perfect if you want to save a fixed amount regularly every month and earn interest on it.
How can I open an FD or RD account with EarlyGrow?
Opening an FD or RD account with EarlyGrow is easy. Simply visit our Investment Services page for detailed steps, or reach out to our team for help in getting started.
