FD vs RD: Which Bank Deposit Is Better for You?
Fixed Deposit (FD) and Recurring Deposit (RD) are both safe, government-insured (up to ₹5 lakh per bank) deposit schemes with quarterly compounding. The difference is timing: FD takes one lump sum upfront, RD takes a fixed amount monthly. The choice between them depends entirely on whether you have a lump sum available now, or savings capacity month-to-month.
Side-by-side comparison table
| Factor | Fixed Deposit | Recurring Deposit |
|---|---|---|
| Deposit pattern | One lump sum upfront | Fixed monthly amount |
| Typical interest rate (2026) | 6.5-7.5% (7-7.75% seniors) | 6.5-7.5% (7-7.75% seniors) |
| Compounding | Quarterly | Quarterly |
| Tenure flexibility | 7 days to 10 years | 6 months to 10 years |
| Premature withdrawal | Allowed (small penalty) | Allowed (rate reduction) |
| Tax on interest | Slab rate (TDS above ₹50K) | Slab rate (TDS above ₹50K) |
| 80C tax saver variant | 5-year tax-saver FD available | Not available |
| Use case | Lump sum from bonus/sale | Building from monthly salary |
| Final maturity for similar effective deposit | Higher (full amount earning longer) | Lower (later installments earn less) |
Fixed Deposit (FD)
An FD takes a single lump sum and locks it for a chosen tenure (7 days to 10 years). Interest is calculated quarterly and either reinvested into the principal (cumulative FD) or paid out periodically (non-cumulative FD). The full deposit earns interest from day one, maximising compounding.
Tax-saver FDs (5-year tenure) qualify for 80C deduction up to ₹1.5 lakh, but the interest is still taxable. Senior citizens get a 0.25-0.5% rate premium at most banks. The TDS threshold of ₹50,000/year (₹1,00,000 for seniors) per bank applies; submit Form 15G/15H to avoid TDS if income is below taxable.
Recurring Deposit (RD)
An RD takes a fixed amount every month for a chosen tenure. Each monthly installment starts earning interest from its deposit date — so the first installment earns for the full tenure, while the last earns only one month's interest. Total maturity is lower than an equivalent FD with the same total deposit, simply because the average money-in-account is half.
RDs suit people building deposits from monthly salary or business income. The discipline of automatic monthly debit is the behavioural benefit — you save without thinking about it. Most banks now offer flexible RDs where you can vary the monthly amount.
Numerical comparison
If you deposit ₹6 lakh in a 5-year FD at 7%, maturity ≈ ₹8.5 lakh. If you deposit ₹10K monthly (₹6 lakh total) in a 5-year RD at 7%, maturity ≈ ₹7.18 lakh. The ₹1.3 lakh difference is purely because of when each rupee starts earning interest.
RD is not 'worse' than FD — it's just suited to a different cash-flow situation. If your only option is monthly saving, RD is better than no savings, and the rate is identical to FD. If you have ₹6 lakh available now (bonus, inheritance, asset sale), FD's full-amount-earning-from-day-one is mathematically optimal.
The right answer: depends on your money situation
Have a lump sum (bonus, sale proceeds, inheritance) now? Use an FD — it maximises compounding by earning on the full amount from day one. Pick tenure based on when you need the money: 1-2 years for short-term, 5 years for tax-saver, 7-10 years for longer commitments.
Saving from a monthly salary with no current lump sum? Use an RD — automatic, disciplined, and the rate is identical. Or use a SIP into a debt mutual fund for slight tax efficiency (debt MF gains held over 36 months pre-Apr-2023 get indexation; post-Apr-2023 always slab rate).
The two aren't mutually exclusive. Many households run an RD for monthly savings into a buffer, and convert it to an FD when a meaningful lump sum accumulates.
Frequently asked questions
What is the difference between FD and RD?+
An FD (Fixed Deposit) takes one lump sum upfront and locks it for a chosen tenure; an RD (Recurring Deposit) takes a fixed amount every month. Interest rates and quarterly compounding are identical at most banks — the only real difference is when your money enters the account.
Which is better — FD or RD?+
FD if you already have a lump sum: the full amount earns interest from day one, so maturity is always higher for the same total deposit. RD if you're saving from monthly income: the rate is identical and the auto-debit builds discipline. Neither beats the other at the same rate — your cash-flow situation decides.
Does an RD give less interest than an FD?+
The RATE is the same, but the maturity is lower for the same total deposited — ₹10,000/month for 5 years (₹6 lakh) at 7% matures to about ₹7.18 lakh, while a ₹6 lakh FD matures to about ₹8.5 lakh. That's because each RD installment earns only for its remaining months, not the full tenure.
Is FD or RD better for tax saving?+
Only FDs have a tax-saving variant — the 5-year tax-saver FD qualifies for Section 80C (old regime only, ₹1.5 lakh cap). No RD qualifies for 80C. Interest on both is fully taxable at your slab rate, with TDS above ₹50,000/year (₹1,00,000 for senior citizens) per bank.
Can I convert my RD into an FD?+
Not directly, but the standard play is to let an RD mature (or accumulate a lump sum in savings) and then open an FD with the proceeds. Many households run both: an RD to accumulate monthly, converted to FDs whenever a meaningful lump sum builds up.
Are FDs and RDs safe?+
Equally safe at the same bank. Both are covered by DICGC deposit insurance up to ₹5 lakh per depositor per bank (principal + interest combined). Spreading deposits across banks extends this cover.
Related calculators
Fixed Deposit
Calculate the maturity amount of your fixed deposit with quarterly compounding (standard for Indian banks).
OpenRD
Calculate the maturity value of your monthly recurring deposit with quarterly compounding — RBI-aligned formula, total interest, and tax impact at your slab.
OpenCompound Interest
Calculate compound interest on any investment with flexible compounding frequency — monthly, quarterly, or annually.
Open80C Saver
Calculate the actual tax saved from your 80C, 80CCD(1B) NPS, and 80D health insurance deductions across all old-regime tax slabs.
Open