RD vs FD comparison—know the difference in returns, interest rates, tenure, tax benefits & risk. Find out which is better: RD or FD for safe investment in 2026.
Introduction
When people search for safe and low-risk investment options, the first question they ask is RD vs FD. Recurring Deposit (RD) and Fixed Deposit (FD) are two of the most trusted saving options in India. Banks and post offices offer them with guaranteed returns and very low risk, which makes them ideal for beginners.
Students, salaried employees, and first-time investors often ask: Which is better, RD or FD?, Where should I invest my money safely?, and Which option gives better returns with less risk? Choosing the right option can play a big role in building strong saving habits.
This article explains RD vs FD in a clear and simple way. We will cover their meaning, key differences, interest rates, returns, taxation, advantages, disadvantages, and finally help you choose the best option for your financial goal.
“FD vs RD: Key Differences, Features & Which is Better – By Bajaj Finserv”
What is a Recurring Deposit (RD)?
A Recurring Deposit (RD) is a savings option where you invest a fixed amount every month for a fixed period. It is best for people who earn monthly income and want to save regularly.
Key Features of RD
- Monthly investment (example: ₹1,000 per month)
- Fixed interest rate
- Tenure usually from 6 months to 10 years
- Guaranteed returns
- Encourages saving habit
RD is ideal for beginners, students, and salaried people who want disciplined saving.
What is a Fixed Deposit (FD)?
A Fixed Deposit (FD) is an investment where you deposit a lump sum amount for a fixed time at a fixed interest rate. The money grows safely and gives assured returns at maturity.
Key Features of FD
- One-time lump sum investment
- Fixed interest rate
- Tenure from 7 days to 10 years
- Low risk and stable returns
- Loan facility available against FD
FD is suitable for people who already have savings and want safe returns.
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RD vs FD: Difference
Understanding the basic difference between RD vs FD helps you choose the right option.
Investment Style
- RD: Monthly deposits
- FD: One-time deposit
Best For
- RD: Regular income earners
- FD: Lump sum investors
Both are safe, bank-backed investments.
RD vs FD Interest Rates
Interest rates are an important part of the RD vs FD comparison.
- RD interest rates usually range from 6% to 7.5% per year
- FD interest rates usually range from 6% to 8% per year
Senior citizens often get 0.25% to 0.50% extra interest on FD and RD.
FD may offer slightly higher returns than RD for the same tenure.
RD vs FD Returns: Which Gives More?
Returns depend on interest rate, tenure, and amount invested.
RD Returns Example
If you invest ₹2,000 per month for 3 years at 7% interest, you invest ₹72,000 in total and may get around ₹80,000 at maturity.
FD Returns Example
If you invest ₹72,000 as a lump sum for 3 years at 7.5% interest, the maturity value may be around ₹89,000.
So, in RD vs FD, FD usually gives higher returns if you already have a lump sum.
RD vs FD Risk Comparison
Both RD and FD are considered low-risk investments.
Safety
- Backed by banks and NBFCs
- Covered under DICGC insurance up to ₹5 lakh per bank
Market Risk
- RD: No market risk
- FD: No market risk
In terms of safety, RD vs FD are equally secure.
RD vs FD Liquidity
Liquidity means how easily you can withdraw money.
- RD: Partial withdrawal allowed in some banks
- FD: Premature withdrawal allowed with penalty
FD is more flexible compared to RD in emergency situations.
RD vs FD Taxation
Tax rules are very important when comparing RD vs FD.
RD Tax Rules
- Interest earned is taxable
- Added to your income and taxed as per your slab
- No TDS on RD interest
FD Tax Rules
- Interest is taxable
- TDS applicable if interest exceeds ₹40,000 (₹50,000 for senior citizens)
In RD vs FD, tax treatment is almost the same.
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RD vs FD: Which Is Better for Different Goals?
For Short-Term Goals
FD is better for short-term goals like emergency fund or parking surplus money.
For Monthly Saving Habit
RD is best if you want to build a saving habit slowly.
For Beginners
RD is easier and more comfortable for new investors.
For Retired People
FD is better because of lump sum returns and regular interest option.
RD vs FD for Students and Salaried People
Students usually prefer RD because it allows small monthly savings. Salaried people also like RD as money gets saved automatically every month.
FD is better for bonuses, maturity money, or retirement funds.
RD vs FD : Which Should You Choose in 2026?
In 2026, interest rates may change, but the basic RD vs FD comparison remains the same.
Choose RD if:
- You earn monthly
- You want disciplined savings
- You have a small amount to invest
Choose FD if:
- You have lump sum money
- You want higher returns
- You need better liquidity
Advantages and Disadvantages of RD
Advantages of RD
- Easy monthly saving
- Low minimum amount
- Safe investment
Disadvantages of RD
- Lower returns than FD
- Penalty on missed payments
Advantages and Disadvantages of FD
Advantages of FD
- Higher interest rates
- Flexible tenure
- Loan facility available
Disadvantages of FD
- Needs lump sum money
- Premature withdrawal penalty
RD vs FD: Quick Comparison Table
“FD vs RD: Which is Better for Safe Money Growth in 2025? – CASHe”
Long-term wealth creation ke liye Fixed Deposit vs SIP – Which Is Better Investment in 2025? samajhna bahut zaroori hai.
Conclusion:
The choice between RD vs FD depends on your income pattern, savings amount, and financial goals. Both are safe investment options and suitable for conservative investors.
- Choose RD if you want to save money every month, have a regular income, and want to build a disciplined saving habit.
- Choose FD if you have a lump sum amount, want slightly higher guaranteed returns, and better liquidity.
RD is ideal for beginners and small savers, while FD is better for surplus money, bonuses, or retirement funds.
Also read: “How to Withdraw PF Through ATM and UPI Easily in 2025.”
Frequently Asked Questions (FAQ)
Q1. RD vs FD: Which is better for beginners?
RD is better for beginners because it allows small monthly investments and builds a saving habit.
Q2. Is RD safer than FD?
No, both RD and FD are equally safe as they are bank-backed investments.
Q3. Can I break RD or FD before maturity?
Yes, both RD and FD can be withdrawn before maturity, but a penalty may apply.
Q4. Which gives better returns, RD or FD?
FD usually gives slightly higher returns than RD for the same tenure.
Q5. Is RD or FD good for long-term investment?
RD and FD are best for short- to medium-term goals. For long-term wealth creation, equity mutual funds are better.