Finance
FD vs RD: Which Deposit Suits You in India?
Same interest rate, different maths, and the gap between them is usually misunderstood.
Quick verdict
Choose an FD if you already have the lump sum, because every rupee earns for the full tenure. Choose an RD if you are saving from monthly income, because you cannot deposit money you do not yet have. At the same rate an RD returns less in absolute terms, and that is arithmetic rather than a worse product.
Decision shortcut
Choose faster with these rules
Compare after-tax returns, not headline rates. At a 30% slab, a 7.1% deposit returns close to 5%.
Stay under Rs 5 lakh with any one bank, including interest, so DICGC cover applies fully. Split across banks if you are above it.
If a senior citizen in the family can hold the deposit, that is worth 0.25% to 0.75% and is usually the largest single improvement available.
Use the FD and RD calculators to see your own numbers before choosing, rather than reasoning from the rate alone.
Overview
Choice IQ looks at practical buying factors such as price, daily-use fit, feature depth, support quality, hidden tradeoffs, and long-term value. Use this section to understand where each option genuinely wins, where it compromises, and which buyer should pick it.
Deep comparison
Choice IQ looks at practical buying factors such as price, daily-use fit, feature depth, support quality, hidden tradeoffs, and long-term value. Use this section to understand where each option genuinely wins, where it compromises, and which buyer should pick it.
Pros
- Clears up a widely misread rate comparison
- Current India rate bands included
- Points at the after-tax number that decides both
Cons
- Rates change frequently and vary by bank and tenure
- Neither is investment advice
Best for whom
Choice IQ looks at practical buying factors such as price, daily-use fit, feature depth, support quality, hidden tradeoffs, and long-term value. Use this section to understand where each option genuinely wins, where it compromises, and which buyer should pick it.
Alternatives
Choice IQ looks at practical buying factors such as price, daily-use fit, feature depth, support quality, hidden tradeoffs, and long-term value. Use this section to understand where each option genuinely wins, where it compromises, and which buyer should pick it.
FAQ
Does an FD pay more than an RD?
At the same rate and tenure, yes, in absolute terms - because the full FD amount earns for the whole period while RD instalments each earn only from the month they land. That is a difference in structure, not in the rate being offered.
Which is better for salaried people?
An RD, if you are building savings from monthly income, since you cannot put in a lump sum you do not have. Once the RD matures, rolling it into an FD is a common and sensible next step.
Is FD or RD interest taxable?
Both are added to your income and taxed at your slab, whether or not you withdraw. Banks deduct TDS above Rs 40,000 of interest a year, Rs 50,000 for senior citizens, but TDS is only an advance - at a 30% slab you owe the rest at filing.
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