Recurring Deposit is a form of investment that enables investors to make systematic monthly payments and save for the long-run. In fact, RDs help in inculcating the habit of saving every month. You must set aside some money; the tenure can be selected by the investor and the amount of RD depends on your ability to save.
The benefit of having an RD is that you can enjoy the same higher interest rate as equivalent to a fixed deposit to a regular savings account. RDs are the most convenient form of investments. Let us assume you want to invest an amount of Rs. 1000 each month. You can either walk up to a nearest branch of any bank or open an account online. If you choose to pay Rs. 1000 every month, after a year, you would get Rs. 12000 with an accumulated interest rate.
One of the key benefits of an RD is that even a minor is allowed to open an account under the supervision of a guardian or parents. Unlike other investments that have a locking period, in case of an RD, premature withdrawals are allowed, but that comes with a penalty. RDs can even be used as collateral to take a loan and you can borrow a loan up to 80-90% on your RD amount.
Let’s take a look at what different leading banks are offering on their recurring deposit schemes:
State Bank of India
• State Bank of India offers an interest rate of 6.70% for a tenure of 1 year for recurring deposits
• The minimum deposit amount is Rs. 100, and in multiples of Rs 10 subsequently
• There’s no benchmark for your maximum investment
• Minimum tenure for an RD: 12 months
• Maximum tenure for an RD: 120 months
Axis Bank
• Axis Bank offers an interest rate on RD of 7% for a period of 1 year or less than 2 years
• The minimum deposit amount requires is Rs. 500 and thereafter in the multiples of Rs. 500
• The minimum tenure for an RD here is 6 months
• Maximum tenure is 10 years
• If either of the installments are missed, a penalty of Rs. 10 per Rs. 1000 per month is charged for the period of delay
HDFC Bank
• HDFC Bank offers an interest rate on RD at 7% for its Recurring Deposit schemes
• The minimum amount to be deposited is Rs. 1000 and in multiples of Rs. 100, while the maximum deposit amount is up to Rs. 1499900 per month
• The minimum tenure with HDFC for an RD is 6 months and in the multiples of 3 months thereafter
• The maximum tenure is up to 10 years
ICICI Bank
• ICICI Bank offers an interest rate of 6.75% for one year
• ICICI Bank offers a flexible RD scheme called as the iFlexi RD plan
• The minimum tenure for an RD is from 13 months to 24 months
• In case of a missed payment or delay in the monthly installment, the customer will not incur any penalty for payments
What are the tax benefits on RD?
Like other personal tax-saving investment instruments, recurring deposits also attract taxes. A 10% TDS is deducted on the returns accumulated from an RD if the total interest exceeds Rs. 10000 in a period of one year.