Recurring deposit vs fixed deposit is really a question of when your money arrives. A fixed deposit (FD) takes a lump sum you already have and locks it at a fixed rate. A recurring deposit (RD) takes the same amount every month and builds a lump sum over time. Both pay a fixed rate; neither carries market risk.
Below is the difference between FD and RD in a table, an example on equal money, and a simple rule for choosing, with post office and bank versions.
At a glance
FD
One deposit, fixed termRD
Monthly deposits, fixed termPost office FD rate
6.9% to 7.5%Post office RD rate
6.7%Tax
Interest taxable for both
Recurring deposit vs fixed deposit: the differences
| Fixed deposit | Recurring deposit | |
|---|---|---|
| How you pay | Once, at the start | Same amount every month |
| Who it suits | Someone with savings already | Someone saving from income |
| Interest earned | On the full amount from day one | On a balance that grows month by month |
| Interest payout | Yearly, quarterly or at maturity (bank); yearly (post office) | At maturity |
| Missed payments | Not applicable | Penalty, can stop the account |
| Breaking early | Usually allowed with a penalty | Usually allowed with a penalty (post office after 3 years) |
Same money, different results
Plan A puts ₹60,000 into a five year post office TD at 7.5%, collecting roughly ₹4,628 each year, ₹23,141 in total.
Plan B sends ₹1,000 monthly into a post office recurring account earning 6.7%, ending near ₹71,370, so ₹11,370 earned on the same ₹60,000.
The FD earns about twice the interest because the whole sum works for all five years, while the RD's money arrives gradually. That is not a flaw of RDs; it is the nature of saving monthly. If you have the lump sum now, an FD earns more. If you do not, an RD is how you build one.
Fixed deposit vs recurring deposit on flexibility
An FD is fire and forget. RDs demand a monthly payment, charge a small fee for each miss, and at the post office freeze after four straight misses. On the other hand, an RD lets you start with as little as ₹100 a month, while a post office FD starts at ₹1,000. Both can be pledged for loans; the post office RD has its own loan facility after twelve instalments.
Tax on FD and RD interest
Interest from both is taxable at your slab each year. A deduction exists only for the five year tax saver FD, and only under the old regime; no RD ever qualifies. TDS applies to both once yearly interest crosses the threshold.
When to choose which
- Choose an FD when a bonus, a gift or a matured investment is already in hand and the date you need it is known.
- Choose an RD when a fixed slice of each salary should build toward something like a bike or a course fee.
- Use both: many people run an RD and, when it matures, put the proceeds into an FD.
Detailed guides: post office FD rates, post office RD and what is a recurring deposit.
What is fixed deposit and recurring deposit, in one line each
A fixed deposit is money placed once for a set time at a set rate. A recurring deposit is money placed in equal monthly parts for a set time at a set rate. Fixed and recurring deposits are both offered by banks and the post office, and both are among the safest ways to save in India.
Frequently asked questions
Which is better, FD or RD?
FD if you already have a lump sum; RD if you are saving monthly from income.
Does FD give more interest than RD?
On the same total money, yes, because the FD's full amount earns interest from day one.
Is the RD interest rate lower than FD?
At the post office, the 5 year RD pays 6.7% against 7.5% on the 5 year FD.
Can I convert my RD into an FD?
Not directly, but you can put the RD maturity amount into a new FD.
Are FD and RD safe?
Yes. Yes. The government stands behind post office deposits, and deposit insurance covers bank ones to ₹5 lakh.
Is an RD a kind of FD?
Many banks describe it that way, as a deposit built in instalments. The rate is fixed like an FD, but the money arrives monthly.