Comparison of RD interest rates between Banks and Post Office
|Bank/Institution||General Public (p.a.)||Senior Citizen (p.a.)||Tenure|
|Post office||5.80%||5.80%||5 Years|
|State bank of India||4.40% - 5.40%||4.90% - 6.20%||1 year to 10 years|
|HDFC bank||3.50% - 5.50%||4.00% - 6.00%||6 months to 5 years|
|ICICI bank||3.50% - 5.50%||4.00% - 6.30%||6 months to 10 years|
|Allahabad Bank||6.25%||6.25%||6 months to 10 years|
|Axis Bank||4.40% - 5.75%||4.65% - 6.50%||6 months to 10 years|
|Bank of Baroda||4.30% - 5.25%||4.80% - 6.25%||6 months to 10 years|
|Canara Bank||4.45% - 5.50%||4.95% - 6.00%||6 months to 10 years|
|Citi Bank||2.75% - 3.00%||2.75% - 3.00%||1 year to 2 years|
|Federal Bank||4.00% - 5.50%||4.00% - 5.50%||6 months to 10 years|
|IDBI Bank||5.00% - 5.10%||5.50% - 5.60%||1 year to 10 years|
|Indusind Bank||6.25% - 6.50%||6.75% - 7.00%||1 year to 10 years|
|Kotak Mahindra Bank||4.40% - 5.30%||4.90% - 5.80%||6 months to 10 years|
|Union Bank||4.50% - 5.60%||4.50% - 5.60%||6 months to 10 years|
|Bank of India||4.75% - 5.30%||5.25% - 5.80%||6 months to 10 years|
|Central Bank of India||4.25% - 5.10%||4.75% - 5.60%||6 months to 10 years|
|Punjab National Bank||4.40% - 5.30%||4.90% - 5.30%||6 months to 10 years|
What is RD?
RD or Recurring deposit is a traditional way of investment which is offered by the banks, post office, and other financial institutions. It offers a fixed rate of interest, has a fixed tenure, and comes with no market risk. RDs help a depositor to invest systematically for a specified period. In this deposit, the depositor invests a fixed amount regularly over the pre-defined periodic intervals for a selected tenure.
Before starting an RD, it is important to look, and compare the factors like default risk, missed payment penalty, and credit ratings of the issuing institutions among others. Not all RDs can be considered safe for investments as there might be good chances of default on the RD account with low-rated institutions. Another important factor to consider before opening an RD account is the latest RD interest rates of the offering banks, NBFCs, or other financial institutions.
Features of Recurring Deposit
- Deposit amount: The minimum amount required to open a RD account is Rs.100, which may vary across the institutions.
- Tenure: The tenure of the RD varies from 6 months to 10 years. The minimum or maximum tenure might vary across institutions.
- Interest rate: Currently, the interest rate offered on the RDs is within the range of 3.5% to 7.50% across different institutions. The actual interest rate on a deposit will depend on the selected tenure for the deposit.
- Partial withdrawals: Partial and Mid-term withdrawals are not allowed.
- Premature closure: Most of the institutions allow premature closure of RD accounts subject to applicable penalties.
Eligibility - Who can open a RD account?
- Any individual
- Any minor,
- If above the age of 10 years, he/she needs to submit the age proof.
- If below the age of 10 years, can open the account under guardianship.
- Any company, government organization, corporate organization, Commercial organization, or Proprietorship.
- NRIs are also eligible to make RD.
Taxability on Recurring Deposit
The interest income earned from the recurring deposit is taxable under the Income Tax Act. The interest income will come under the ‘Income from Other Sources’ and will be taxed as per the income-tax slab rate of the individual.
If the interest earned is less than Rs.40,000 then the institution/bank will not deduct the TDS but if the income exceeds Rs.40,000, then the institution will deduct the TDS at 10%. If an individual does not want TDS deduction, then he/she can submit the Form 15G/H in the branch.
Recurring Deposit Premature Closure
The recurring deposit has a fixed maturity and can be withdrawn at maturity. But, almost all the banks offer the premature closure of the account. But, in the case of premature closure, the account holder might have to pay some penalty as specified by the institution. The penalty may vary across different financial institutions.
Frequently Asked Questions (FAQs)
- What is a recurring deposit?
Recurring deposits or RD is a traditional way of investment. In this, fixed investments are done after regular intervals. It has a fixed maturity and offers a fixed rate of interest.
- Does the recurring deposit have a lock-in period?
Yes, it has a lock-in period till the maturity period. However, in most cases, it can be closed before the maturity by paying the applicable penalty.
- What is the interest rate offered on recurring deposits?
Recurring deposit offers a fixed rate of interest which can be compounded monthly, quarterly, semi-annually, or annually depending upon the offering institution. The interest varies from bank to bank but is generally between 3.5% to 7.00% p.a. For different tenures as per the current rates.
- What is the tenure of the recurring deposit?
The tenure of the recurring deposit can be between 6 months to 10 years. The depositor can select the tenure at the time of the account opening.
- Does the recurring deposit give the benefit of tax deductions?
No, the recurring deposit does not offer any tax deductions under Section 80C of the Income Tax Act, 1961.
- Does the interest earned on the recurring deposits is tax-free?
No, interest earned on the recurring deposit account is taxable. Interest income is added to the income of the account holder and is taxed as per the income tax slab rate.
- Can we make premature closure of the recurring deposit account?
Yes, a recurring deposit account provides the option to account holders to make premature closure of the account. But, it can only be done after paying the applicable penalty as specified by the bank.
- Can a minor open a recurring deposit account?
Yes, a minor can open an account. But, if a minor is above the age of 10 years, then he/she can open an account in their own name by submitting the age proof. If a minor is below the age of 10 years, then the account can be opened by the guardian on behalf of the minor.
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