Published By: Business Desk
Last Updated: September 13, 2023, 07:00 IST
Recurring Deposits, often known as RDs, are special term deposits provided by banks across India. It is a platform for investing that enables individuals to set up recurring deposits and receive good returns. RDs frequently offer investors an opportunity to build a large fund even with small contributions every month.
Recurring deposits allow investors to make monthly contributions. Apart from banks such as the State Bank of India (SBI), ICICI, and HDFC, the post office also provides RD.
Recurring Deposits: Features
- Recurring Deposit plans have been designed to inculcate a regular savings habit among people.
- The minimum monthly investment required to create an RD account is only Rs 100 at banks. Recurring deposits are appropriate if you have a sizable surplus income. The RD schemes are suitable for people who are looking to invest small amounts every month. You can invest Rs 10 per month in post office RD accounts.
- An individual can start a recurring deposit account for as little as 6 months and as much as 10 years. RDs also allow you to choose the time period that is most convenient for you.
- A recurring deposit account has a lock-in duration of 30 days to 3 months, which is at the discretion of the service provider.
Differences between State Bank of India RD and Post office RD:
SBI accepts recurring deposits for terms ranging from one to ten years, with a minimum deposit of Rs 100 every month thereafter in multiples of Rs 10.
State Bank of India also offers recurring deposit interest rates ranging from 6.5 per cent to 7 per cent for the general public and 7 per cent to 7.5 per cent for senior citizens. These interest rates have been effective from February 15, 2023.
SBI RD: Interest Rates
- 1 Year to under 2 years 6.80 per cent (for general) and 7.30 per cent (for senior citizens).
- 2 years to under 3 years 7 per cent (for general) and 7.50 per cent (for senior citizens).
- 3 years to less than 5 years 6.50 per cent (general) as well as 7.00 per cent (senior citizens).
- 5 years and up to 10 years 6.50 per cent (general) and 7.50 per cent (senior citizens).
Post Office RDs
The maturity period for the Post Office Recurring Deposit is 5 years. A minimum monthly donation of Rs 100, or any amount in multiples of Rs 10, with no maximum limit.
Senior citizens do not receive any additional interest rate benefits under the post office RD plan. Furthermore, these rates have been effective from July 1, 2023.
Post Office RD: Interest Rates
The five-year recurring deposit is 6.5 per cent.
Recurring Deposit: Taxation Rules
The interest earned on recurring deposits is subject to Tax Deduction at Source (TDS). Also, the TDS of 10 per cent is levied on interest accumulated on RD investments. TDS will be deducted if the interest earned on recurring deposits exceeds Rs 10,000.