Factors to Consider Before Opening a Recurring Deposit Account

A Recurring Deposit is one of the best investment options for those looking to grow their money without substantial risk. It requires the investment of a defined RD amount, at a defined tenure. Interest on the Recurring Deposit is credited to the account at the end of the period or on maturity. You can read more about the Recurring Deposit benefits here.

Opening up a Recurring Deposit is very easy with most banks. But before you open this account, there are a few things you must know.

Here are five factors to consider before opening a Recurring Deposit Account:

  • Minimum amount:

    The Recurring Deposit minimum amount is Rs. 1,000. This investment can be increased in multiples of Rs. 100. This makes it very easy to open a Recurring Deposit. It doesn’t need a lot of funds to be opened. Most banks have a very large upper limit for the installment. This makes it easy for anyone who has little funds to open an account and earn from it.
  • Tenure:

    The minimum period of a Recurring Deposit is six months at most of the banks. These deposits can be opened from 6 months to 10 years, depending on the depositor. Once the tenure and the RD amount has been set, it cannot be altered till maturity of the deposit.
  • Interest:

    Interest is earned on balance in a Recurring Deposit account every month. In simple words, a Recurring Deposit works like opening multiple Fixed Deposit Accounts, each having the same maturity. The rate of interest on Recurring Deposits ranges between 7% to 9%. Senior citizens typically command a higher rate of interest than other depositors. This interest is paid on maturity of the RD. Monthly interest facility is not available.

    Read more about the Recurring Deposit Interest Calculator.
  • Taxability of interest:

    The interest earned on Recurring Deposit is taxable just like Fixed Deposit interest. However, the minimum amount of interest that a Recurring Deposit account should earn before the bank deducts TDS is Rs. 40,000(Rs.50000 for senior citizens). So, if the interest on the Recurring Deposit interest is less than Rs. 40,000(Rs.50000 for senior citizens). the bank will not deduct any tax on it.  If your income is below the no tax limit, then it is best to submit Form 15G/15H to the bank so that it does not deduct tax.
  • Withdrawals:

    A Recurring Deposit is like a Fixed Deposit. Once the RD amount has been deposited, it cannot be withdrawn until maturity. Partial withdrawals from the account are not allowed.

With this information about a Recurring Deposit, you can open one and ensure your money grows.

Looking to apply for a Recurring Deposit? Click to get started!

​​​​​​​Book Recurring Deposits easily with HDFC Bank Savings Account. New customers can book a Recurring Deposit by opening a new Savings Account , existing HDFC Bank customers can book their Recurring Deposit by clicking here.

*Terms and Conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances.