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.
Quick answer
RD vs FD: 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.
| 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.