## Fixed Deposit vs. Recurring Deposit – 2022 Which one should You Choose?

## Fixed Deposit vs. Recurring Deposit 2022- Which one should You Choose?

With the launch of the Recurring Deposits by Indian banks There is a constant debate over which of the Fixed and Recurring Deposits is the most beneficial. Both term deposit schemes have fixed returns and assure the security of the funds put into. But, when comparing them in depth, the Fixed Deposit scheme has an edge over the other two.

In spite of their diverse portfolios there are many commonalities in Fixed and Recurring deposits. Both provide the identical rates of interest when used by the same bank. The two are also term-deposit plans where the funds are placed into an investment for a specified duration and the greatest benefit from the investment will be realized only after the duration or the maturity. However, there are a myriad of reasons someone should consider a second thought prior to deciding on one of the two schemes for term deposits.

*Let’s look at the distinctions between the profits from Fixed Deposit schemes as well as Recurring Deposit plans:*

Features Offered:

There aren’t any major distinctions in the features available to each FD and RD that are offered by banks. There is only one difference in in the method of investing in the financial instruments. In the Fixed Deposit scheme the investor invests a specific amount of capital over an exact period of time and at the end of the period you have the option to cash out the money you have invested as well as the accrued interest paid by the bank. In contrast, with a Recurring deposit it is necessary to set an amount according to the bank’s guidelines, which must be deposit every month for the specified duration chosen by you. When the period or at maturity the bank will allow you to take out the amount in lump sum each month for the particular period, along with the accrued interest paid by the bank.

In both cases the interest rate is constant throughout the duration of time after you’ve opened the deposit accounts for term even if the interest rate at the particular bank are changed during the term. As time passes the popularity of both FD and RD is increasing in the eyes of the general public since both of these financial instruments are considered to be the most secure and most secure method of investing in the present.

Taxability on Returns:

TDS is applicable to Fixed Deposit returns when the income from interest exceeds the amount of Rs. 10000 per year, whereas the return is exempt from TDS applied to Recurring deposit returns. But, you’re required to pay tax on income at your personal tax rate if your income , in addition to Recurring Deposit returns are in the tax bracket that is specified in accordance with the Income Tax guidelines. Similar rules apply to Fixed Deposit returns if you earn a rate of interest less than the rate of. 10000 per year.

Profit Margin:

A profit percentage is higher with Fixed Deposit compared to Recurring Deposits with the exact amount of money invested over the same time frame at the same interest rate. To study the results of FD and RD, consider the following scenario in which the same amount of Rs. 24000 (lumpsum for FD and Rs. 2000 each month in Recurring Deposit) is available for deposit for the duration of a year in Fixed and Recurring. Since the accounts are both set up in the same institution Both products have the same rate of 9% of interest that is compounded every quarter.

Here’s what you’ll get at the end of the term (i.e. one year):

With Fixed Deposit

- Invested Amount (Rs) 24000
- Interest Rate (p.a.) Compounded quarterly at 9%
- Total interest earned in the course of a period of one year (Rs) 2234
- Total Amount after One Year (Rs) 26324

With Recurring Deposit

- Amount Invested (Rs) 2000 p.m.
- Interest Rate (p.a.) Compounded quarterly at 9%
- Total interest earned in one calendar year (Rs) 1195
- Total Amount after One Year (Rs) 25195

*(Difference between FD vs R: (Rs) 1039]*

Based on the above scenario the recurring deposit scheme provides you with the amount of Rs. 1039 less than a fixed Deposit scheme with similar amount for the same time period, with the same interest. Therefore, it is recommended to select Fixed Deposit scheme when you have a lump-sum sum to invest instead of a Recurring Deposit schemes since with FD you earn interest on the principal amount for a year. you earn interest for the 1st installment for 12 months, 2nd installment for 11 months, 3rd installment for 10 months and son on. As a result, FD offers a higher maturity value than RD.

Making the Final Choice:

Because FD provides better returns opposed to RD and RD, it’s impossible for all people to invest a large sum in one go. Recurring deposit is the most suitable alternative for those who wish to enjoy the benefits of the Fixed Deposit but aren’t able to invest in a lump-sum sum in the first place. Instead, they would rather keep a regular, fixed amount each month of their earnings and then deposit it into their RD account in order to reap higher returns.

But, FD is a wiser choice for investors with an investment amount that is lump-sum. So, whatever financial instruments you pick between FD and it is likely to get higher returns on your investment with no kind of risk involved.

### Fixed Deposit vs. Recurring Deposit 2022- Which one should You Choose?

This question will probably be in the mind of all the people who are interested in Fixed Deposit vs. Recurring Deposit – 2022.

### Fixed Deposit vs. Recurring Deposit?

With the launch of the Recurring Deposits by Indian banks There is a constant debate over which of the Fixed and Recurring Deposits is the most beneficial. Both term deposit schemes have fixed returns and assure the security of the funds put into. But, when comparing them in depth, the Fixed Deposit scheme has an edge over the other two.

### With Fixed Deposit

1. Invested Amount (Rs) 24000 2. Interest Rate (p.a.) Compounded quarterly at 9% 3. Total interest earned in the course of a period of one year (Rs) 22344. Total Amount after One Year (Rs) 26324

### With Recurring Deposit

1. Amount Invested (Rs) 2000 p.m. 2. Interest Rate (p.a.) Compounded quarterly at 9% 3. Total interest earned in one calendar year (Rs) 1195 4. Total Amount after One Year (Rs) 25195

### Taxability on Returns:

TDS is applicable to Fixed Deposit returns when the income from interest exceeds the amount of Rs. 10000 per year, whereas the return is exempt from TDS applied to Recurring deposit returns. But, you’re required to pay tax on income at your personal tax rate if your income , in addition to Recurring Deposit returns are in the tax bracket that is specified in accordance with the Income Tax guidelines. Similar rules apply to Fixed Deposit returns if you earn a rate of interest less than the rate of. 10000 per year.