FD vs RD in India 2026: Which Is Better for Your Money?

FD vs RD: The Core Difference

Both Fixed Deposits (FD) and Recurring Deposits (RD) are offered by Indian banks and earn the same interest rate for the same tenure. The critical difference is how you invest:

• FD: One lump-sum deposit at the start.
• RD: Equal monthly instalments throughout the tenure.

Because an RD's early instalments earn interest for the full tenure while later instalments earn for fewer months, the total interest on an RD is always lower than an FD with the same total principal over the same period. Use the FD calculator and RD calculator to see this in action.

Interest Rate Comparison (June 2026)

Banks offer identical rates for FDs and RDs of the same tenure. Here are indicative 1-year rates from major banks:

See the full list in our best FD rates guide for 2026.

Worked Example: ₹60,000 in FD vs RD at 7.2% for 12 Months

Let's say you have ₹60,000 to save for one year and HDFC Bank is offering 7.20% per annum.

Option A: FD (Lump Sum)

You deposit ₹60,000 upfront. With quarterly compounding at 7.20% p.a.:Quarterly rate = 7.20% / 4 = 1.80%
Maturity = ₹60,000 × (1 + 0.018)^4 = ₹64,376 approxInterest earned = ₹4,376

Option B: RD (₹5,000/month for 12 months)

You deposit ₹5,000 every month. The first instalment earns interest for 12 months, the last instalment earns for only 1 month. Using the standard RD formula:Total principal = ₹60,000 | Total interest ≈ ₹2,340Maturity = ₹62,340

Verdict: The FD generates ₹2,036 more interest because the full ₹60,000 works for you from day one. The RD is not inferior — it simply serves a different purpose (building savings month by month).

Head-to-Head Comparison

Who Should Choose an FD?

An FD works best when you have a lump sum available — annual bonus, gratuity, proceeds from a policy maturity, sale of an asset, or a gift. Rather than leaving it in a savings account earning 2.7–4%, parking it in an FD at 6.45–8.10% earns meaningfully more with zero risk.

FD is also the right choice if you want to save tax under Section 80C using a 5-year tax-saving FD (up to ₹1.5L deduction per year).

Who Should Choose an RD?

An RD is designed for people who don't have a lump sum but can set aside a fixed amount every month. It enforces a savings habit — missing an RD instalment incurs a small penalty (typically ₹1.50–₹2 per ₹100 per month late), which discourages impulsive spending.

Common use cases: saving for a vacation, building an emergency fund over 12–24 months, or saving for a child's school fees due in two years.

Tax Treatment: Identical for FD and RD

Interest on both FD and RD is taxed as income from other sources at your applicable slab rate. TDS is deducted by the bank if annual interest exceeds ₹40,000 (₹50,000 for senior citizens) across all FDs and RDs in a branch. Submit Form 15G (below 60 years, income below taxable limit) or Form 15H (senior citizens) to avoid TDS. Read our detailed guide on FD interest tax and TDS rules.

Premature Withdrawal Rules

Both FD and RD allow premature closure, but with a rate penalty of 0.50–1.00% (bank-specific). For RDs, premature closure is treated differently — you receive interest calculated at the rate applicable for the period actually completed, minus the penalty rate. Always check your bank's premature withdrawal policy before opening a long-tenure deposit. See our full guide on FD premature withdrawal penalties.

Frequently Asked Questions

Can I open an RD and an FD at the same bank simultaneously?

Yes. There is no restriction on holding both simultaneously. Many investors use FDs for lump sums while running an RD for monthly savings in parallel — a simple form of deposit laddering.

Does the RD rate change if RBI changes the repo rate?

No. Once you open an RD, the rate is fixed for the entire tenure, regardless of RBI rate changes. This is a key advantage of both FDs and RDs over savings accounts, where rates can change any time.

What happens if I miss an RD instalment?

Banks charge a late-payment penalty, typically ₹1.50–₹2 per ₹100 per month of delay. If you miss multiple instalments (typically 3 or more consecutively), the bank may close the RD prematurely and pay interest at reduced rates.

Is TDS applicable on RD interest?

Yes, TDS at 10% applies on RD interest (same as FD) if total interest across all deposits at a branch exceeds ₹40,000 in a financial year (₹50,000 for senior citizens). File Form 15G/15H to avoid TDS if your income is below the taxable limit.

Can NRIs open RDs and FDs in India?

NRIs can open NRE or NRO FDs. NRE RDs are less commonly offered — most banks prefer NRE FDs for NRI clients. NRO RDs are available at some banks. The NRE FD rates guide covers NRI-specific options.

Which is better for senior citizens — FD or RD?

Senior citizens (60+) get an extra 0.25–0.75% on both FDs and RDs. For senior citizens who want a regular monthly income stream, a non-cumulative FD (quarterly or monthly payout) is often preferred over an RD, which only pays at maturity. SCSS at 8.2% p.a. quarterly payout is usually the best option for seniors before FD.