FD vs RD: Which Investment is Better for You in 2025?

 When it comes to low-risk investment options in India, Fixed Deposits (FDs) and Recurring Deposits (RDs) are among the most popular choices. Both offer steady returns and capital safety, but they serve different purposes depending on your financial goals. If you’re wondering which is better—FD or RD, this article compares the two across key aspects like returns, flexibility, and suitability.

FD vs RD Which Investment is Better for You in 2025

---

What is a Fixed Deposit (FD)?

A Fixed Deposit is a financial instrument offered by banks and NBFCs where you deposit a lump sum for a fixed tenure at a pre-decided interest rate. You earn fixed deposit interest on the amount for the entire term.

Key Features of Fixed Deposit:

• One-time lump sum investment

• Fixed tenure (7 days to 10 years)

• Fixed deposit rates are higher than savings accounts

• Premature withdrawal possible (with penalty)

• Option for monthly, quarterly, or cumulative interest payouts

---

What is a Recurring Deposit (RD)?

A Recurring Deposit allows you to invest a fixed amount every month for a specific tenure. It’s perfect for salaried individuals who prefer saving systematically.

Key Features of Recurring Deposit:

• Monthly fixed contributions

• Tenure ranging from 6 months to 10 years

• Interest compounded quarterly

• Premature withdrawal allowed with a penalty

• Ideal for disciplined savings

---

FD vs RD: A Comparative Analysis

Feature	Fixed Deposit (FD)	Recurring Deposit (RD)
Investment Method	One-time lump sum	Monthly installments
Interest Rates	Slightly higher	Slightly lower
Interest Payout	Monthly/Quarterly/Cumulative	Paid at maturity
Flexibility	Less flexible once invested	More flexible due to monthly payments
Returns	Better for long-term investors	Better for regular savers
Liquidity	Moderate (penalty on early withdrawal)	Moderate (penalty on early withdrawal)

---

Which Offers Higher Returns: FD or RD?

In general, FDs offer better returns than RDs because the entire investment earns interest from day one. Since RDs involve monthly deposits, the interest is calculated differently, and the effective return is slightly lower.

However, if you compare FD interest rates vs RD interest rates, the nominal rates might appear the same. The actual return differs due to the time value of money.

Current Fixed Deposit Rates in India (2025)

Here are some of the best fixed deposit interest rates offered by top institutions:

Bank/NBFC	FD Interest Rate (General)	FD Interest Rate (Senior Citizens)
Bajaj Finance FD	Up to 8.50%	Up to 8.75%
SBI	6.50% – 7.10%	7.25% – 7.60%
HDFC Bank	6.60% – 7.20%	7.10% – 7.75%
ICICI Bank	6.60% – 7.10%	7.10% – 7.65%

Tax Implications

Both FD and RD interest earnings are taxable under “Income from Other Sources.” If your annual interest exceeds ₹40,000 (₹50,000 for senior citizens), TDS (Tax Deducted at Source) is applicable.

To reduce tax burden, investors can:

• Opt for Tax Saver Fixed Deposits (with a 5-year lock-in)

• Submit Form 15G/15H if eligible

---

Who Should Choose FD?

• Investors with a lump sum amount

• Those looking for higher returns

• Retirees needing monthly interest payouts

• People who can lock in funds for a fixed period

---

Who Should Choose RD?

• Salaried individuals with a monthly income

• New investors starting small

• People with short- to medium-term goals

• Ideal for children’s education or travel savings

---

Conclusion: FD or RD – Which is Better?

Choosing between FD and RD depends on your income, financial goals, and savings habit.

• If you have a lump sum, go for a Fixed Deposit to enjoy higher and upfront interest earnings.

• If you want to build a habit of regular savings, choose a Recurring Deposit.

Both are secure, predictable, and low-risk investments. You can even combine FD and RD to diversify your savings strategy.