Recurring Deposit or Fixed Deposit — same bank, same interest rate, so which one actually leaves you with more money? The honest answer: it depends on whether you already have the money. Here’s the side-by-side math with the same ₹1.2 lakh, the situations where each wins, and the tax rules that quietly change the result.
Quick answer: run your own numbers in the free RD & FD Maturity Calculator — switch between RD and FD, enter the amount, rate and tenure, and compare maturity values instantly. Free, no sign-up, runs in your browser.
1The one difference that decides everything
An FD invests a lump sum on day one, so the entire amount earns interest for the whole tenure. An RD invests month by month, so your first instalment earns for 12 months but your last one earns for barely a month. On the same total outlay, the average rupee in an RD is invested for only a little over half the tenure — and that’s why the FD’s interest is roughly double.
2Same ₹1,20,000, same 7% — side by side
| Fixed Deposit | Recurring Deposit | |
|---|---|---|
| How you invest | ₹1,20,000 on day one | ₹10,000 every month × 12 |
| Interest rate | 7% p.a. | 7% p.a. |
| Approx. maturity (1 year) | ≈ ₹1,28,600 | ≈ ₹1,24,600 |
| Interest earned | ≈ ₹8,600 | ≈ ₹4,600 |
| Why | Full amount earns all 12 months | Deposits earn 12, 11, 10 … 1 months |
Figures are rounded; banks compound quarterly and round differently, so treat these as close approximations — the calculator gives the exact numbers for your bank’s rate.
But this comparison has a catch: it assumes you have ₹1.2 lakh sitting free on day one. If you don’t, the FD simply isn’t an option — and the right comparison becomes RD vs leaving ₹10,000 a month in a savings account. There the RD wins comfortably: ≈ ₹4,600 interest vs roughly ₹1,900–2,300 at typical savings rates.
3The formulas (for the curious)
Most Indian banks compound both FDs and RDs quarterly. For the FD, P is your lump sum, r the annual rate, t the years. For the RD, every monthly instalment is compounded separately for the time it stays invested, then summed — tedious by hand, instant in the calculator.
4When each one is the right choice
Choose an FD when:
- You already have the lump sum — a bonus, maturity proceeds, sale money. Every idle month costs you interest.
- You want to lock a good rate before an expected rate cut — the FD freezes today’s rate for the whole tenure.
- You need 80C tax savings — a 5-year tax-saver FD qualifies for the ₹1.5 lakh deduction (old regime); RDs never do.
Choose an RD when:
- You’re saving from a monthly salary — the RD forces the habit and beats letting the money sit in savings.
- You’re building toward a goal — school fees, a trip, a down payment — with a fixed date.
- You’d be tempted to spend it otherwise — the mild penalty for missing instalments is a feature, not a bug.
Best of both — the ladder: run an RD through the year, then roll each maturity into an FD. Your monthly savings become lump sums that earn full-tenure FD interest from then on.
5Tax: identical, with one exception
- Interest is fully taxable on both, at your income-tax slab, under “income from other sources”.
- TDS applies to both — banks deduct 10% TDS when your total FD + RD interest at that bank crosses the threshold (₹50,000 a year for most depositors, ₹1,00,000 for senior citizens, from FY 2025-26). Submit Form 15G/15H if your income is below the taxable limit.
- Only the 5-year tax-saver FD gives a deduction (80C, old regime, with a 5-year lock-in). No RD variant qualifies.
6Compare your own numbers in 30 seconds
- Open the calculator Go to the RD & FD Maturity Calculator — free, no sign-up, nothing uploaded.
- Run the FD case Choose FD, enter your lump sum, your bank’s rate and the tenure. Note the maturity value.
- Run the RD case Switch to RD, enter the monthly instalment and the same rate and tenure — then compare the two maturity values side by side.
7Frequently Asked Questions
RD vs FD — which is better for 1 year?
If you have the full amount today, the FD — on ₹1.2 lakh at 7% it earns roughly ₹8,600 vs about ₹4,600 in an RD funded monthly. If you’re saving from salary month by month, the RD is the better realistic option.
Do RDs and FDs have the same interest rate?
Usually the same or very close — most banks publish one card rate per tenure and apply it to both. Always check your own bank; small differences compound.
Is RD interest tax-free?
No. RD interest is fully taxable at your slab, and since 2015 it’s also subject to TDS under the same rules as FD interest.
What happens if I break an FD early?
Banks typically pay interest for the period the money actually stayed, at the rate applicable to that shorter period, minus a premature-withdrawal penalty of about 0.5–1%. You lose some interest but never your principal.
What if I miss an RD instalment?
Banks charge a small penalty per missed month and may close the RD after several consecutive defaults, paying out what you’ve accumulated. One missed month is a minor cost, not a disaster.
Are RDs and FDs safe?
Bank deposits (including both RD and FD) are insured by DICGC up to ₹5 lakh per depositor per bank, covering principal and interest together.
General information, not investment advice — rates and tax thresholds change; confirm with your bank or a financial adviser before deciding.
