15 Facts About Recurring Deposits You Need To Know!

Recurring Deposit schemes offered by banks are among the most popular investment options many people choose. Salaried people, as well as people with less income, prefer RDs as their investment tool. According to this scheme, an individual must invest a fixed amount of money every month for a pre-determined period and earn interest. The principal amount and interest are returned to the investor after the RD's maturity.

• The minimum investment amount to be deposited every month in an RD scheme is as low as ₹1000. This is a major attraction for people with low income and salaried people.
• As the investor has to invest a part of his income regularly, it is highly beneficial in inculcating the habit of saving.
• Payment to one's RD account can be made directly from his Savings or Current Account.
• An RD Account can be linked to one's Savings Account. Hence, it does not require any documentation work under these circumstances.
• Unlike Fixed Deposit schemes, where one has to invest a lump sum amount at one time, recurring deposits do not burden the investor in such a manner.
• Mutual Funds and Stocks are subject to market risks. However, in RD Schemes, the deposited amount is safe and secure and will be returned along with interest at the end of the fixed tenure.
• The interest rate offered on a Recurring Deposit is as much as the interest offered for Fixed Deposits.
• The interest rate on RD is locked in, so one need not worry about fluctuations in interest rates.
• Recurring Deposits are the best investment option, particularly for those planning to tackle short-term financial situations like funding money for a dream vacation or wedding, higher education costs, etc.
• Under some banks' Flexible Recurring Deposit scheme, the investor will not be penalised if he fails to deposit the amount in a particular month.
• Senior citizens are given a higher rate of interest. It is usually 0.5% more than the regular interest given to others.
• TDS (Tax Deducted at Source) is applicable on Recurring Deposits. It is deducted at 10% on the interest earned, which exceeds ₹40,000 (₹50000 for senior citizens). This rule has come into effect since April 2019. However, no TDS is deducted on an interest earned up to ₹40,000 (₹50000 for senior citizens). This is done to safeguard the interest of lower-income investors.
• You may wonder if RD interest is taxable. Recurring Deposits attract no tax exemptions. Income tax has to be paid on the Interest amount received from Recurring Deposits, at the rate of the RD holder's tax slab.
• Form 15G has to be submitted by the investors with no taxable income to avoid TDS on Recurring Deposits. Form 15G applies to people under the age limit of 60 years.
• Nowadays, almost all popular banks are offering online Recurring Deposit facilities. With this online facility, one can deposit money in their RD account, close the RD account, view transactions and update necessary information. All this can be done from the comfort of one’s home, at their own convenient time, without having to visit the bank at its working hours.

Here's a step-by-step guide to opening a Recurring Deposit via HDFC Bank NetBanking:

• Visit the HDFC Bank official website.
• Click on 'Login' and then on 'Net Banking.'
• Provide your customer ID and password to log in to your net banking portal.
• On the menu, under 'Transact', click 'Open Recurring Deposit.'
• Fill out the form by providing the details as asked for.
• Confirm your details.

Book Recurring Deposits easily with an 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.

You can read more about tax and Recurring Deposits here.

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

*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.