Factors to Consider Before Opening a Recurring Deposit Account

A Recurring Deposit is an excellent investment choice for those seeking to grow their money with minimal risk. It involves investing a fixed amount regularly over a set period. Interest on the Recurring Deposit is credited to the account at maturity. You can explore more about the benefits of Recurring Deposits here. 

Opening a Recurring Deposit account is straightforward with most banks. However, before you proceed, you should know a few important things. 

Here are five factors to consider before opening a Recurring Deposit Account: 

1. Minimum amount 

The minimum amount for a Recurring Deposit is ₹1,000, with increments available in multiples of ₹100. This makes it easy to start a Recurring Deposit without requiring a large initial investment. Most banks offer a high upper limit for the instalments, allowing even those with modest funds to open an account and earn interest. 

2. Tenure 

The minimum period for a Recurring Deposit at most banks is six months. Deposits can be opened for durations ranging from six months to ten years, depending on the depositor's preference. Once the tenure and amount are set, they cannot be changed until the deposit matures. 

3. Interest 

Interest accrues on the balance in a Recurring Deposit account each month. A Recurring Deposit functions like setting up multiple Fixed Deposit accounts with the same maturity date. The interest rate on Recurring Deposits typically ranges from 7% to 9%, with senior citizens usually receiving a higher rate than other depositors. This interest is paid out at maturity, as the option for monthly interest payments is unavailable. 

4. Taxability of interest 

The interest earned on a Recurring Deposit is taxable, just like Fixed Deposit interest. However, the minimum interest a Recurring Deposit account must earn before the bank deducts TDS is ₹40,000 (₹50,000 for senior citizens). If the interest on the Recurring Deposit is less than ₹40,000 (₹50,000 for senior citizens), the bank will not deduct any tax. If your income is below the no-tax limit, submitting Form 15G/15H to the bank is best to ensure no tax is deducted. 

5. Withdrawals 

A Recurring Deposit is like a Fixed Deposit. Once the RD amount has been deposited, it cannot be withdrawn until maturity. Partial withdrawals from the account are not allowed. 

With this information about a Recurring Deposit, you can open one and ensure your money grows. 

Looking to apply for a Recurring Deposit? Click to get started! 

​​​​​​​Book Recurring Deposits easily with the HDFC Bank Savings Account. New customers can book a Recurring Deposit by opening a new Savings Account; existing HDFC Bank customers can book their Recurring Deposit by clicking here. 

*Terms and Conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances.