Head to head
RD vs FD
These are the same idea with a different rhythm. An FD takes one lump sum today; an RD takes a fixed amount every month. Same bank, similar rates, same taxation.
The right pick is purely about whether you already have the money or are building it up month by month.
| Recurring Deposit | Fixed Deposit | |
|---|---|---|
| How you deposit | Fixed amount monthly | One lump sum |
| Typical rate | ~6.5–7.5% | ~6.5–7.5% |
| Returns on same money | Slightly lower (money in later) | Slightly higher (full amount compounds) |
| Tax | Taxed at slab | Taxed at slab |
| Best for | Building a habit from salary | Parking a lump sum safely |
Pick Recurring Deposit if…
- You don't have a lump sum yet and want to save from each paycheck.
- You're building discipline toward a short-term goal.
Pick Fixed Deposit if…
- You already have the money sitting idle.
- You want the maximum guaranteed return for a fixed period.
The verdict
Have the money now? Use an FD — the whole amount compounds from day one. Building it from your salary? An RD turns saving into an automatic habit. Neither is an investment, though: for goals 5+ years out, a SIP will likely beat both after tax.
Common questions
- Does an FD give higher returns than an RD?
- For the same total money and rate, yes — because an FD's full amount compounds from the start, while an RD's later instalments have less time to grow. It's a timing difference, not a rate difference.
- Is RD or FD interest tax-free?
- Neither. Interest on both is added to your income and taxed at your slab, with TDS if it crosses the annual threshold. PPF is the tax-free alternative for long horizons.