Saving money regularly is essential for financial security. A Recurring Deposit allows you to invest a fixed amount every month and earn interest, helping you grow your savings steadily.
Meaning of Recurring Deposit Account
A Recurring Deposit (RD) is a term deposit where you deposit a fixed amount regularly, usually monthly. It encourages regular savings and offers higher interest than a regular Savings Account. It promotes a disciplined savings approach, accumulating substantial funds over time with compounded interest.
How does a Recurring Deposit work?
Understanding what is a Recurring Deposit Account involves knowing how it operates. You decide on a fixed amount to be deposited every month for a predetermined tenure. Once the tenure ends, you receive the total principal amount, along with the interest earned. The interest rate on RDs is generally similar to that of Fixed Deposits (FDs), and the interest is compounded quarterly, which can significantly boost your savings.
Features of Recurring Deposit
| Feature |
Details |
| Rate of interest |
Varies between 3.5% and 7% per annum, compounded quarterly |
| Minimum deposit |
Can be as low as ₹10, but typically ranges from ₹100 to ₹500 |
| Tenure of investment |
Ranges from 6 months to 10 years, offering flexibility to meet your financial goals |
| Interest calculation |
Interest is usually calculated quarterly to maximise returns |
| Mid-term / partial withdrawal |
Generally not allowed; some banks may permit this with a penalty |
| Premature account closure |
Permitted but usually incurs a penalty, often a reduced interest rate for the invested period |
Factors to consider before applying for RD
1. Term period of the Recurring Deposit account: Choose a term period that fits your financial plan, ranging from 6 months to 10 years.
2. Interest rate offered: Compare the interest rates offered by different banks to maximise your returns.
3. Premature withdrawal conditions: Understand the penalties involved in premature withdrawals to minimise losses in case of an emergency.
How to open an RD Account online
To open an RD Account online, you can visit Axis Bank's official website or mobile banking app, fill out the application form, provide the necessary KYC documents, and choose your deposit amount and tenure. The process is straightforward and convenient.
How to open an RD Account offline
To open an RD Account offline, visit your nearest bank branch. Fill out the RD application form, submit the required KYC documents and specify your deposit amount and tenure. The bank staff will assist you in completing the process.
How much is the TDS on RD?
TDS on RD is deducted at 10% if the interest earned exceeds ₹40,000 annually (₹50,000 for senior citizens). Without a PAN, the TDS rate is 20%.
Who should invest in RD?
Recurring Deposits are ideal for individuals with a regular income and seeking a low-risk investment option with guaranteed returns.
Also Read: Exploring different types of Recurring Deposit (RD) Accounts
Conclusion
Recurring Deposits offer a structured way to save regularly and earn interest. They provide flexibility in deposit amount and tenure, making them ideal for disciplined savers. Opening an RD Account, whether online or offline, is simple and enhances financial security.
For example, Axis Bank's Recurring Deposit helps you build savings through systematic monthly deposits. You can start with a minimum amount of ₹500 and earn interest based on the deposit amount and tenure. With tenures ranging from 6 months to 10 years, it's a versatile option for growing your savings. Use the Axis Bank Recurring Deposit Calculator to estimate your returns and plan your investments effectively.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
