Difference between Fixed Deposit (FD) and Recurring Deposit (RD)

What is Fixed Deposit (FD)?

What is Recurring Deposit (RD)?

Difference Between Fixed Deposit and Recurring Deposit

Let’s see the major points of difference between a fixed deposit and a recurring deposit:

Point of Difference

Fixed Deposit

Recurring Deposit

Investment Amount

Requires a Lump Sum Investment

Needs regular fixed investments at periodic intervals that can be small amounts

Minimum and Maximum Tenure

7 Days to 10 Years

6 Months to 10 Years


FD provides option of monthly, quarterly, and yearly interest payouts, making them an excellent choice for income generation.

Returns from RD are paid only on maturity as a lumpsum. There is no option of periodic withdrawal.


There is no scope for default here since the complete payment is done at the start of the investment.

If the RD payment is defaulted for a consecutive 6 months, the bank or financial institution has a right to close the account.

Income Tax Benefit

The tax safer FDs that have a lock in period of 5 years offer a tax saving option under section 80C of income tax

No tax benefit option available.

Deposit Frequency

Lumpsum at the start

Periodic - mostly monthly

Features and Benefits of Fixed Deposits

Maturity Period

Fixed deposits have a predetermined maturity period as chosen by the investor at the start of the investment.

Fixed Interest Rate

The interest rate is fixed at the time of investment and remains constant throughout the tenure, thus providing stable and guaranteed returns and preserving your capital against market fluctuations.

Lumpsum Investment

Fixed deposits require a one-time lumpsum to be paid, thus making it an easy and straightforward investment instrument.

Low Risk Investment

FDs offer capital protection and returns at a fixed interest rate, thus ensuring the return of the principal amount, along with capital appreciation. Thus, they are a low-risk investment, especially suited for risk averse individuals.

Flexible Interest Payout Options

Investor has a choice to receive interest payouts monthly, quarterly, annually, or on maturity, thus providing you the flexibility to align the income from investment as per your life goals and requirements.

Loan Against FD

Many banks and financial institutions provide the option of loan or credit card against fixed deposit, thus providing an option of liquidity without breaking the FD.

Senior Citizen Benefits

Senior citizens usually enjoy a higher interest rate on their FDs, thus providing an additional income for the retirees.

Tax Benefits

Tax Saver FDs offer tax benefits under Section 80C of the Income Tax Act, allowing investors to claim deduction on the amount that they invest in these FDs.

Features and Benefits of Recurring Deposits

Regular Periodic Investment

In a recurring deposit, you can invest a fixed amount at regular intervals, usually monthly for a predetermined period, thus following a systematic approach to investment.

Fixed Tenure

Similar to the fixed deposits, RDs have a predetermined maturity period that the investor chooses at the time of starting the investment.

Interest Accumulation

In RDs, the interest is calculated on the total amount in deposit each month, thus growing the corpus gradually.

Interest Payout

RDs pay the total accumulated amount on maturity. Periodic interest withdrawal as in case of FDs is not allowed.

Auto Debit Option

Usually, all banks and financial institutions provide auto debit option in order to maintain a more disciplined approach to RD and to minimise the instance of payment bounce towards RD instalment.

Fixed Deposit Vs Recurring Deposit - Which is Better?

Frequently Asked Questions

Can I Withdraw Funds from my FD Prematurely?

Yes. Premature withdrawal and closure are allowed in fixed deposits. However, you will have penalty charges for the same.

Is the Interest Earned on FDs Taxable?

Yes, the interest earned on your FDs and RDs is taxable as per your income slab.

Can I Change Nomination in FDs and RDs during the Tenure of the Deposit?

Yes. You can change the nomination by submitting the required form.

Is There a Monthly or Quarterly Interest Payout Option in Recurring Deposits?

No, recurring deposits do not have the option of monthly/quarterly interest payout.

Can I Change the Tenure and Instalment Debit Date of my Recurring Deposit?

No. The tenure and instalment debit date once set, cannot be changed during the term of the deposit.