Bank Fixed Deposits (FDs) and Recurring Deposits (RDs) remain the bedrock of Indian household savings. While equities deliver growth, term deposits provide capital safety, predictable cash flows, and immediate liquidity for emergency funds and short-term capital goals.
| Parameter | Fixed Deposit (FD) | Recurring Deposit (RD) |
|---|---|---|
| Investment Mode | One-time lump sum investment | Regular monthly disciplined installments |
| Tenure Range | 7 days to 10 years | 6 months to 10 years |
| Interest Calculation | Compounded quarterly on entire lump sum | Compounded quarterly on incremental monthly deposits |
| Target Audience | Retirees with lump sums, proceeds from property sale or bonuses | Salaried individuals saving for predictable annual goals (school fees, vacation) |
| Premature Withdrawal | Allowed (typically 0.5% to 1.0% interest rate penalty) | Allowed (subject to penalty and interest recalculation for elapsed tenure) |
Deposits with all scheduled commercial banks, small finance banks, and cooperative banks are protected under the Deposit Insurance and Credit Guarantee Corporation (DICGC):
| Depositor Category | TDS Threshold Limit | Exemption / Tax Relief |
|---|---|---|
| General Citizens (Under Age 60) | ₹40,000 annual interest per bank | Interest taxed at marginal slab rates; submit Form 15G if total taxable income is zero. |
| Senior Citizens (Age 60 & Above) | ₹50,000 annual interest per bank | Section 80TTB provides up to ₹50,000 tax deduction; submit Form 15H if taxable income is zero. |
To avoid locking a large sum at the bottom of an interest rate cycle, use an FD ladder: