FD vs RD — Which Deposit Earns More?
Same bank, same rate — yet an FD earns about twice the interest of an RD on the same total money. Here is why, when that matters, and when the RD is still the right choice.
Quick Recommendation
Quick Recommendation
Have the money today? FD — the full amount compounds from day one. Saving it month by month from salary? RD — it's the same rate applied to money as it arrives. The FD's higher interest is a timing effect, not a better product.
FD vs RD — Full Comparison
FD vs RD at a Glance
| Feature | Fixed Deposit | Recurring Deposit |
|---|---|---|
| Investment style | One lump sum | Fixed monthly instalment |
| Interest rate | 6.5–7.5% | Same or nearly same as FD |
| Minimum | ₹1,000 (varies) | ₹100/month |
| Tenure | 7 days – 10 years | 6 months – 10 years |
| Tax | Interest at slab rate, TDS > ₹40k | Identical treatment |
| Best for | Money you already have | Money you will save monthly |
Same Rate, Different Earnings — Why?
FD and RD usually pay the same interest rate, yet an FD earns roughly twice the interest on the same total outlay over the same period. No trick: in an FD the entire amount earns interest from day one; in an RD your first instalment earns for the full tenure but the last one earns for barely a month. Same rate, less average money invested, less interest. The comparison below makes it concrete.
Worked Example (engine-computed)
Same ₹6,00,000 total, same 7% rate, same 5 years:
| FD: ₹6,00,000 on day 1 | RD: ₹10,000/month × 60 | |
|---|---|---|
| Total invested | ₹6,00,000 | ₹6,00,000 |
| Maturity amount | ₹8,48,867 | ₹7,15,180 |
| Interest earned | ₹2,48,867 | ₹1,15,180 |
| Effective annual yield | 7.19% on full amount | 7.19% EAR per rupee-year invested |
The FD earns about twice the RD’s interest — not because it is a better product, but because the money was invested longer. If you have ₹6 lakh today, the FD is strictly better. If you don’t, the RD is how you get there. Verify with the FD Calculator and RD Calculator.
Tax Implications
Identical. Interest from both is “Income from Other Sources”, taxed at your slab rate (estimate yours with the Income Tax Calculator), with 10% TDS once combined interest at one bank crosses ₹40,000 a year (₹50,000 for senior citizens). Form 15G/15H avoids TDS if your income is below the taxable limit. Neither offers any 80C benefit — for tax-saving guaranteed instruments, see PPF vs FD.
Risk and Liquidity
Risk is identical: both are bank deposits under the same DICGC ₹5-lakh insurance. Liquidity is nearly identical: both can be closed prematurely with a ~1% rate penalty. The RD adds one behavioural risk the FD doesn’t have — missed instalments, which attract small penalties and can eventually let the bank close the account. And one behavioural advantage: the standing instruction makes saving automatic.
Which Is Best for Whom?
- Choose FD when you already have the lump sum — bonus, maturity proceeds, sale money. Every month it sits in savings instead is interest lost.
- Choose RD when saving from a monthly salary toward a 1–3 year goal — an emergency fund, a trip, a down-payment.
- Long-horizon savers: if the goal is 5+ years away, compare the RD against a SIP and, for tax-free guaranteed savings, against PPF before defaulting to bank deposits.
Common Mistakes
- Letting a lump sum drip into an RD. If the money exists today, an FD earns roughly double — the RD structure only makes sense for money that arrives monthly.
- Judging RD by the FD’s interest number. The lower RD interest is a timing effect, not a worse rate. Per rupee-month invested, the products are equivalent.
- Forgetting both are taxed. A 7% deposit is ~4.9% after 30% tax — factor that into any goal planning.
- Missing RD instalments. Pay before the 5th of the month, ideally by standing instruction, to earn that month’s interest and avoid penalties.
Accuracy & Sources
Last reviewed: July 2026. All calculations run in your browser. No data is sent to any server.
Frequently Asked Questions
At the same rate and tenure, an FD earns more interest on the same total amount because the entire sum is invested from day one, while RD instalments arrive gradually — our 5-year ₹6 lakh example shows the FD earning roughly double. Per rupee actually invested, the two are equivalent; the FD simply has more rupee-months working.
At most banks, yes — RD rates match or sit within about 0.1% of the FD rate for the same tenure, and senior citizens get the same 0.25–0.5% premium on both. The products differ in cash-flow structure, not pricing.
No. RD interest is taxed exactly like FD interest — added to your income at slab rate, with 10% TDS once your combined deposit interest at one bank exceeds ₹40,000 a year (₹50,000 for seniors). For tax-free guaranteed savings, PPF is the instrument to compare, not RD.
Not directly, but the equivalent is simple: when the RD matures, put the maturity amount into an FD so the accumulated corpus compounds as a lump sum. Many savers run this loop continuously — RD to accumulate, FD to store — which captures the best of both structures.
Banks charge a small penalty (typically ₹1–2 per ₹100 per month of delay), and repeatedly missed instalments can let the bank close the RD early at a reduced rate. A standing instruction dated before the 5th of the month avoids both the penalty and the lost month of interest.