Recurring Deposit (RD)
5paisa Research Team
Last Updated: 31 Dec, 2024 05:01 PM IST

Content
- Introduction
- What Is a Recurring Deposit
- How a Recurring Deposit Works
- Features of Recurring Deposit Account
- Types of Recurring Deposits
- Eligibility and Documents Required for a Recurring Deposit
- Required Documentation:
- Interest Rates and Returns on a Recurring Deposit
- Tax Implications of a Recurring Deposit
- Advantages of Investing in RD
- Who Can Invest in a Recurring Deposit?
- Factors to Consider Before Opening RD Account
- Conclusion
Introduction
India is progressively becoming a central investment hub where more individuals seek low-risk investment tools.
One such tool with assured yet not-so-high returns is RD. RD’s full form is a Recurring Deposit. Considered a highly flexible investment tool, an RD allows individuals to choose the investment tenure and amount at their convenience.
Anyone who fails to have a lump sum amount in their bank or other savings account to meet their short-term financial goals can use this investment tool.
Whether in a bank or any NBFC, you can deposit a small portion of your salary or income into the RD account to start ahead with your investment and savings plan.
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Frequently Asked Questions
Banks use their built-in software to calculate the maturity amount of an RD. They sometimes use the formula – A = P(1+r/n)^nt to compute the maturity amount. Here, r stands for the annual rate of interest, ‘P’ for principal, ‘t’ for tenure, and ‘n’ for the number of times the interest got compounded.
Yes, you can cancel your recurring deposit before the end of the maturity term.
No, you won’t qualify for tax exemption on regular deposits in your RD account. As per Section 80C of Income Tax 1961, a tax deduction claim for investment in recurring deposits isn’t possible.
Yes, anyone holding a recurring deposit account can add a nominee to that respective account. Not only one, but you can add multiple nominees to your recurring deposit account.
You only need INR 100 to open a recurring deposit account in any bank or NBFC. The fact that the RD scheme doesn’t involve a high minimum deposit requirement makes it an ideal investment option for others.
Yes, senior citizens enjoy a higher interest rate on their recurring deposits. Typically, the ROI rate is 0.5% more than the interest rate for other customers.