Recurring Deposit
Recurring Deposit in India
Recurring deposit is a type of term deposit offered by financial institutions such as banks that allow investors to deposit funds in the Rd account on a monthly basis for a fixed tenure. An RD is different from a fixed deposit as funds are invested in regular instalments instead of lump-sum.
| Interest Rate | Upto 6.80% |
| Tenure | 6 months to 60 months |
| Deposit Amount | ₹ 10 to No Limit |
| Top Providers | Banks, NBFCs, Post Offices or Small Finance Banks |
| Popular RD Schemes | Regular RD, Senior Citizens Recurring Deposit, Flexi RD |
Top Bank Recurring Deposit Schemes in India
Who is eligible to open a Recurring Deposit online account?
A recurring deposit can be opened online by any of these:
Can I renew my RD account after its maturity?
Recurring Deposit accounts can be renewed after maturity as and when the prefixed instalments have been paid successfully over the period by the depositor. The renewal of RD after maturity is considered as a new account, and thereby the interest calculation is done based on updated rates. Also, most lenders offer the renewal of RD for the same tenure as that up to maturity. For instance, if you have completed 60 instalments for your RD, that is five years, then the renewal of RD will be accepted for five years only.
Is Nomination facility available on Recurring Deposits?
Yes, recurring deposits provide the nomination facility to deposit holders. However, only one nominee per RD account is allowed, irrespective of the fact whether the RD was opened in a single name, or jointly by multiple people. However, there is a provision to change the nominee over the RD tenure, by filling the required forms and declaring the same to the bank. The nomination facility on RD functions as per the directives laid by the RBI.
Is Premature Withdrawal allowed on Recurring Deposit?
A recurring deposit does not allow partial, and midterm withdrawal, however premature withdrawal of RD is allowed. The deposit holder can break the recurring deposit account with the bank in case of financial emergencies by closing their RD account. However, closing the account prematurely will attract a penalty of 1 or 2 per cent. This penalty is deducted from the interest accrued on RD account for the period for which the deposit was with the bank. In addition, it must also be kept in mind that the minimum lock-in period for a recurring deposit is three months. Thus, any request for premature withdrawal before the three months will lead to zero interest earned on RD, followed by the return of only the principal amount deposited.
Is RD Taxable?
As per the regulation announced on June 1, 2015, the recurring deposits are subjected to TDS deductions. This is because the interest earned on RD is added to the annual Income of the depositor under the head ‘Income from other sources’. However, the TDS is not deducted if the interest earned on recurring deposits does not exceed ₹ 10,000.
Income tax on Interest on Recurring Deposit
The interest earned on RD is added to the annual Income of the depositor under the head ‘Income from other sources’. However, the TDS on RD is not deducted if the interest earned on recurring deposits ranges up to ₹ 10,000. Also, it must be noted that while the RD is taxable, yet this applies only for those RD holders who fall in the tax slabs that are obliged to pay income tax returns. Thus, income tax holders that are exempted from paying the tax as per their annual Income of up to ₹ 2.50 Lakh in case of regular citizens, and up to ₹ 3,00,000 or five lakhs in case of senior citizens based on their age, can avoid availing the TDS deductions. For this, the regular citizens are required to submit the Form 15 G, while senior citizens need to submit Form 15 H.
What is the revised TDS Rate 2022 for RDs?
As per the current regulations, A TDS of 10% is charged on the interests earned on fixed deposits. However, if the interests earned is below, or up to ₹ 10,000, then the TDS is not deducted.
Can I get a Loan against Recurring Deposit?
Yes, one can avail a loan against Recurring deposit, by treating the RD as collateral. An RD account holder can avail a loan up to 75-90% of the value of the deposit. This, however, may vary across different banks. The interest rate charged on loan against recurring deposit is usually 1-2% higher than the regular interest rate offered on the RD account. Availing a loan against RD is beneficial to fulfil the financial urgencies, as one is not required to break their RD in order to avail the loan. Thus, one can cope up with the financial distress without compromising on the investment factor.
Type of Recurring Deposit
Other than the regular recurring deposit, there are different types of RD that are customized as per the needs of the different kinds of investors. These are listed as follows:
RD for senior citizens: A RD for citizen citizens provides the same benefits as that of a regular recurring deposit. However, these RDs provide a higher interest rate than that of a regular RD. The additional interest rates offered on senior citizens ranges between 0.25% to 0.75%. Thus, this helps senior citizens earn a higher maturity amount. It can be opened by people above the age of 60.
RD for NRI: RD investment options are not only offered to the Indian residents but also to the NRIs that are the Non-Resident Indians. The NRI deposit holder can invest in the NRI account through the NRE or the NRO accounts that stands for Non-resident external account and non-resident ordinary account respectively.
Flexi RD: The Flexi RD is a type of recurring deposit that allows the investor to invest funds in an RD as per his or her convenience. As per this facility, the individual can deposit funds by breaking it up in multiples of the core amount, which however is pre-decided as per the terms and conditions.
Who can issue a Recurring Deposit?
A recurring deposit can be offered by different financial institutions. Some of these are listed below:
FAQs
✅What does Recurring deposit mean?
A recurring deposit is a term deposit offered by financial institutions like banks or NBFCs that is beneficial for people with a regular source of Income. A recurring deposit allows one to deposit a fixed amount in the RD account on a monthly basis. It is a beneficial investment option for people who earn fixed Income, as one can avail assured returns.
✅ What is an RD account?
A recurring deposit account is an investment account opened with a bank or an NBFC. The RD account holder is bound to deposit a fixed amount in this account on a monthly basis to earn interests. The RD account does not allow any partial or mid-term withdrawal and funds can be withdrawals after the maturity. The maturity amount is inclusive to the principal amount and interests earned.
✅ What is the benefit of recurring deposit?
Recurring deposits provide a number of benefits such as flexibility, guaranteed returns, and regular savings. Apart, the recurring deposit facility can be availed even by minors under the supervision of their parents or guardians. RDs are equally beneficial for senior citizens, as they can earn additional interest rates. Also, RD holders can avail loan against RD, by keeping the RD as collateral and that too without compromising on the investment as one is not required to break the RD to avail this loan. Thus, recurring deposits are a beneficial investment option.
✅ Is RD tax-free?
The interest earned on RD is considered as an additional source of Income, therefore it is taxable. However, if the interest earned is less than or up to ₹ 10,000, then the RD can be tax-free. Also, if one falls under the tax-slab that is exempted from paying tax, then they can save themselves from paying tax on RDs.
✅ Can I withdraw RD anytime?
The minimum lock-in period for recurring deposit is three months. In case you withdraw your RD before this period, no interest will be provided on the deposited amount. Thereby, it is advisable to complete the lock-in period before withdrawing the RD.
✅ What happens if the RD instalment is not paid?
If a person fails to pay their RD instalment for a particular month, then the bank or the NBFc may charge a penalty for the same. However, if the same is continued for a number of months, then the RD account is deactivated or even closed, and cannot be redeemed until the outstanding balance is paid off.
✅ Can we change the RD amount?
No, one cannot change the RD amount during the pre-defined term for which one is bound to pay the RD instalment.
✅ How many RD can I open?
One can open as many RD as they want. However, it must be kept in mind that the interest earned on RD is taxable if it exceeds ₹ 10,000. Thus, one must invest in multiple RD as per his or her financial abilities.
- 2022-04-21 : Fino Payments Bank Receives RBI Nod to Offer Partner Banks FD and RD Services
Fino Payments Bank has received the RBI approval for referral services of fixed deposit (FD) and recurring deposit (RD) on behalf of a partner bank as a Business Correspondent of Suryoday Small Finance Bank (SSFB). - 2022-02-18 : SBI Hikes Recurring Deposit Rates
State Bank of India has increased SBI RD interest rates, and as a result, the rates vary between 5.1%-5.5% for the general public. The bank has revised the FD interest rate for tenure two years to less than three years by 10 basis points to 5.20 per cent from the earlier 5.10 per cent. For three years to less than five years tenure, the rate has been increased to 5.45%. Further, for five years to 10 years tenure, the interest rate has been increased to 5.50 per cent. - 2022-01-03 : Citibank Revises Interest Rates on Recurring Deposits
Citibank has revised the interest rates on recurring deposits of less than Rs. 2 crores with effect from December 31, 2021. The bank is offering an interest rate of 2.75 per cent to 3.00 per cent. - 2021-12-21 : Union Bank of India Launches New RD Scheme
Union Bank of India has launched a unique recurring deposit scheme, Union Monthly Plus. It allows you to increase or decrease the monthly amount using Step Up or Step Down feature. - 2021-11-17 : Axis Bank Revises Recurring Deposit Rate
Axis Bank has revised the interest rate for recurring deposit on various tenures. The interest rate for tenure 30 month to 3 year is 5.40% and 5 year to 10 year is 5.75%. Senior citizens will get an extra 0.50% than the general interest rate.
