A recurring deposit or an RD is an excellent investment and savings tool for those looking for a low-risk investment option. The premise is simple – you invest a monthly amount, which is predetermined by you, fix a tenure, and you earn interest on the money invested at a fixed rate.
A Recurring Deposit is perfect for when you’ve got expenses that you can predict, such as paying off debt or paying for your home loan, and so on. Moreover, with a recurring deposit, you’ve got an easier way to make saving money a regular activity, and most importantly, a recurring deposit allows your money to earn you interest. The periodic investments earn you interest, which you receive along with the principal amount as a lump sum amount at the end of your recurring deposit’s tenure.
A recurring deposit is a popular choice for salaried individuals if they are able to save a few thousand every month. However, the interest you earn isn’t the only benefit of a recurring deposit – here are a few more:
With a recurring deposit, you can choose the tenure that is best fit for you. Different banks offer different tenures, but these usually range from 6 months to 10 years.
After your tenure ends, the bank will pay you the sum you saved along with interest earned during the tenure. This, based on your choice, will be credited to your bank account or paid to you in cash. Moreover, with a fixed interest rate, you will be aware of how much amount of funds you’re slated to receive before maturity.
If the amount of interest earned is below INR 10,000 per annum, then you’re exempt from paying tax on the interest earned. However, if your interest exceeds INR 10,000 per annum, then you must pay 10%, which is deducted at source.
Senior citizens get the benefit of the an additional interest rate on RD (0.50%).