Bajaj finance fixed deposit
FD and RD have been among the most popular investments in the last few decades. In banking terms, FD meaning is Fixed deposit while RD meaning is Recurring Deposit. It is because the returns from FDs and RDs are significantly higher than those earned from savings accounts. People can make a higher interest rate on their savings by using fixed and recurring deposits.
It is common for people to hold a small amount of savings in their savings accounts and to invest the remainder in term deposit schemes such as fixed term deposits and recurring deposits.
The difference between FD and RD is based on some factors, making them a good choice for different people. Although both fixed and recurring deposits are term deposit schemes, they work differently. Many people feel comfortable investing money in these deposit schemes instead of stocks, bonds, shares, and mutual funds.
Fixed Deposit
As a financial instrument, FD meaning can be understood as a type of investment that allows people to invest a predetermined amount of money for a certain period and earn interest on that investment. It is possible to choose between two types of Fixed Deposits:
- Non-cumulative FD Plan
A traditional FD meaning can be understood as a scenario in which the principal invests for the tenure chosen by the investor, and the interest is paid back to the investor on a monthly, quarterly, or annual basis. In this traditional FD plan, people earn interest periodically while their principal remains invested during the tenure.
- Cumulative FD Plan
Cumulative Fixed Deposits (FDs) invest principally at the time of the FD while compounding interest quarterly and reinvesting along with the principal. There is a time when the accumulated amount, i.e., principal and accrued interest, is paid out at the maturity of the FD.
Recurring Deposit
In Recurring Deposits (RDs), people can create a habit of saving a set amount every month and depositing it into their RD accounts. Every month, they must deposit a predetermined amount into their RD account once they open their account. They will receive their accumulated deposit and interest at the end of their tenure.
Here is the difference between Fixed Deposit (FD) and Recurring Deposit (RD)
Tax
There is no tax on interest earned on an FD or a Recurring Deposit once it has been set up. However, in the case of an FD whose claim exceeds Rs. 10,000 in a financial year, the bank deducts 10% of the interest as TDS for investors who have submitted their PANs and 20% for investors without. To avoid tax deductions made on a person who is not eligible for TDS, they can submit Form 15G. Recurring Deposit interest does not fall under TDS; the person must report it to the IT department.
Duration
A wide variety of interest rates are available depending on the type and term of the FD. FD can be invested for at least seven days or up to ten years, depending on the situation. Therefore, it is possible to open an account for a minimum and maximum duration of 6 months and ten years for an RD account.
Rate of interest
Banks offer different interest rates on FDs and RDs, depending on deposit tenure and type of FD/RD scheme chosen. A bank’s minimum deposit requirement for an FD or an RD may also vary from one bank to another. You can choose from several Recurring Deposits schemes depending on your needs. Some RDs are specifically designed for students, senior citizens, etc., and interest rate also varies according to the RD schemes available.
There are differences between FD and RD meaning as interest accrued on FDs and interest accrued on RDs regarding the same period and principal.
FDs earn interest monthly from the entire amount, while RDs earn interest for the whole of the duration of the RD and the rest after the funds are deposited into the account.
Purpose
People can earn interest on their investments through Fixed Deposits (FDs) and Recurring Deposits investment done in banks or NBFC such as the Bajaj Finance Fixed Deposit scheme or Recurring Deposit scheme. Since both are guaranteed returns on investment, they are both safe investments. However, FDs allow individuals to invest idle cash for a set period, while RDs require monthly deposits of predetermined amounts.
Conclusion
Even both investment options have same principal amount, tenure, and interest rate, FDs have higher interest income than RDs. In contrast, RDs are ideal for investors who can invest funds regularly, whereas FDs are ideal for lump-sum investors.
A fixed deposit benefits those with lump sum funds available for growth and investments. In contrast, recurring deposits help those who can save their income after monthly expenses to make investments. Consequently, fixed and recurring deposits have much to do with an investor’s financial needs and goals.
