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Fixed deposit v/s Recurring deposit - Which is better?

The attraction for a fixed deposit and a recurring deposit is the fixed returns with safety ofmoney invested. But when you compare the two, a fixed deposit scores higher than a recurring

deposit.

Jitendra P.S.Solanki Investment dviser ! "#P $xpertise % &utual #unds ,#ixed Income &ore

a'out the $xpert... ( ) * +oogle ( * Jitendra Solanki JS #inancial dvisors

&any a time-s investors get confused whether to invest in a fixed deposit or a recurring deposit

for their investment o'ectives. The attraction for 'oth these instruments is the fixed returns with

safety of money invested. But when you compare the two, a fixed deposit scores higher than a

recurring deposit. /et-s see how these two products differ in the earnings and when you shouldopt for them0

Features

Both #1 and 21 are fixed income products availa'le from 'anks. 3n the invested amount 'anks

pay you a fixed interest which can 'e at a specific fre4uency till the term or on maturity. t theend of the term, the maturity amount which is your invested capital, along with remaining or

accumulated interest is paid. lthough the interest of 'anking products change with interest rates

scenario, in 'oth these products once you have invested the interest rate remains samethroughout the term. In recent times the high rising rates have prompted 'anks to offer high

interest rates on these two instruments and so the attraction of investors has increased manifold.

Taxability

Both these products have the same taxa'ility. The interest received from these two is is added toyour total income and taxed at your personal income tax rate. So if you are in )*5 tax sla', theinterest from #1 ! 21 will 'e taxed at the same rate. 6owever, there is a difference in the

nature of tax deduction. In a fixed deposit, 'anks deduct T1S if the interest income in a year

exceeds 2s (**** 'ut there is no T1S deduction in recurring deposit. This one feature swaysinvestors- interest towards 21 when there is a comparison.

Where you earn more?

7hen you compare 'oth these products, a fixed deposit fetches you more income than a

recurring deposit. /ets- assume you have invested 2s 89*** in a fixed deposit at start of the year

and 2s 8*** p.m. in a recurring deposit for a year. Both these products offer you a :5 rate ofinterest compounded 4uarterly. This is what you will earn from these two instruments%

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s you can see, after a year you will receive 2s 8;)89 in a fixed deposit while in 21 you willreceive 2s 8