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How is the Recurring Deposit Interest Calculated?

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Recurring deposit (RD) is an investment option that banks and financial institutions in India are offering. It is one of the low-risk options combined with flexible tenure options that provide higher returns than a savings account.

Recurring deposits, or more commonly referred to as RD, is a financial investment option that works as an FD but offers relatively high flexibility. It means something that repeatedly happens by investing in RD. It means that investors can invest in installments instead of lump-sum deposits.

Who should invest in Recurring Deposit?

Investing in recurring deposits is a reasonable option for those who do not currently have a large amount, but are looking for a low-risk investment option where it is possible to earn high returns with regular deposits.

All Indian residents and HUFs are eligible for recurring deposits with their banks. Many banks allow minors to open RDs to instill a savings habit since childhood. However, children must be guardians to manage their finances. Many banks are asking their customers to set an amount in multiples of 100.

How much tax on recurring deposits?

Like FD, the same applies to taxes to invest in RD. Tax deducted at source for money invested in recurring deposits, i.e., TDS. Assessment of this tax 10% p.a., if the deposit is more than Rs. 40,000. Remembered that interest earned on RD is taxable and not the value of full maturity. To avoid TDS on both recurring deposit compound interest calculator India and fixed deposits, creditors with no taxable income should apply Form 15G.

Some factors affecting the interest rates of RD

Several factors are taken into consideration while determining the rate of interest to be paid to the depositor. Some crucial points explained further:

  1. Tenure

Tenure is simply the time frame. Money is invested in a recurring account. Interest depends on various factors, and it is one of them. In all tenure options, the RD interest rate varies.

  1. Applicant’s age

Banks and other financial institutions offer high-interest rates to senior citizens. It can range from 0.50 percent to 0.75 percent of regular deposit rates. Here, the minimum age requirement of senior’s citizens may vary depending on the provider.

  1. Current Economic Environment

Banks and other deposit-providing financial institutions continue to update their interest rates as the economic situation changes. There are different reasons for this, such as changes in RBI repo rate, inflation, etc. The current situation, therefore, plays an essential role in deciding the RD level. 

  1. Banks and Finance Institutions

It is one of the factors that can have a significant impact on the amount of maturity that can be attained. Banks and financial institutions provided RD. Investing in bank-fixed deposits is a safe investment option. Individuals can also invest in fixed deposits of a quoted firm. But they should check the credit rating on the deposits provided before they decide to invest in a fixed deposit of a company. Fixed deposits for companies with higher / better credit scores, such as FAAA, FAA, are considered more secure than other corporate fixed deposits.

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