Skip to main content

Investing in Recurring Deposits (RDs) - Check the pros and cons

Buy Gold Mutual Funds

Invest Mutual Funds Online

Download Mutual Fund Application Forms

Call 0 94 8300 8300 (India)

You will not be charged TDS if you invest in these accounts

BANKS have begun to reduce deposit interest rates. Small investors, who do not have large amounts to invest in fixed deposits (FDs), can look at making regular invests in a recurring deposits (RDs).


How does an RD work?


RDs are like systematic investment plans (SIP) in FDs. You will have to choose the amount of investment that you can make every month and the tenure. However, you need to be sure that you will be able to pay the fixed amount every month because any delay in the payment of scheduled instalments will change the maturity amount due to application of penalty charges.

Most banks do not allow partial payment, nor can you pay more than the determined amount. The minimum balance of deposit and tenure varies from bank to bank. While in case of post offices, you can start an RD with Rs 10, with the State Bank of India (SBI), you can start an RD with a minimum amount of Rs 100, while for many private banks, the minimum deposit is Rs 500 per month. While some banks have no prescribed upper limit, most private sector banks allow you to invest up to Rs 14.99 lakh per month. A post office RD account is similar to an RD in a bank, but, has a fixed tenure of five years. However in a bank, the RD can be opened for six months to 120 months, or, 10 years in intervals of three months.


Method of earning interest: Says Surya Bhatia, a certified financial planner, "In an RD, you earn an interest on a compounding basis. Typically, the compounding is quarterly. So for instance, if you started an RD of Rs 1,000 from January 2012, the interest earned on your capital invested in February would be calculated for 11 months, while your RD in March will earn interest for 10 months."

Interest rates: While some banks, such as SBI, offer the same interest for an RD and for a FD, there are others who offer lower interest rates for RDs, compared with FDs. So, do compare the rates of banks before investing. For instance, HDFC Bank offers an interest rate of 7.25 per cent on an RD for 12 months, while on a regular FD of one year and one day to one year and 15 days, the rate is 9 per cent, while for a FD of one year and 16 days, the rate is 9.25 per cent. The bank offers 8.5 per cent for RDs of 15, 24 months, 9.25 per cent for 27, 36, 39, 48 and 60 months.

No TDS: The best feature of an RD is that there is no tax deducted at source (TDS). Adds Bhatia, "Although, RDs do not have TDS, the interest income is taxable on an accrual basis based on your marginal rate of tax." With no TDS, you don't have to open different RDs in multiple branches like you would have to with FDs to avoid TDS.

But, FDs offer you better ability to extract higher returns if you have ready funds to invest right away without spreading them over a few months. 

Happy Investing!!

 

We can help. Call 0 94 8300 8300 (India)

 

Leave your comment with mail ID and we will answer them

                        OR

You can write back to us at prajnacapital [at] gmail [dot] com

---------------------------------------------

Invest Mutual Funds Online

Transact Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Download Mutual Fund Application Forms

Best Performing Mutual Funds

    1. Largecap Funds        Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds     Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds    Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds             Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds              Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Gold Mutual Funds             Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

Popular posts from this blog

Am you Required to E-file Tax Return?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Am I Required to 'E-file' My Return? Yes, under the law you are required to e-file your return if your income for the year is Rs. 500,000 or more. Even if you are not required to e-file your return, it is advisable to do so for the following benefits: i) E-filing is environment friendly. ii) E-filing ensures certain validations before the return is filed. Therefore, e-returns are more accurate than the paper returns. iii) E-returns are processed faster than the paper returns. iv) E-filing can be done from the comfort of home/office and you do not have to stand in queue to e-file. v) E-returns can be accessed anytime from the tax department's e-filing portal. For further information contact Prajna Capit...

IDFC - Long term infrastructure bonds - Tranche 2

IDFC - Long term infrastructure bonds What are infrastructure bonds? In 2010, the government introduced a new section 80CCF under the Income Tax Act, 1961 (" Income Tax Act ") to provide for income tax deductions for subscription to long-term infrastructure bonds and pursuant to that the Central Board of Direct Taxes passed Notification No. 48/2010/F.No.149/84/2010-SO(TPL) dated July 9, 2010. These long term infrastructure bonds offer an additional window of tax deduction of investments up to Rs. 20,000 for the financial year 2010-11. This deduction is over and above the Rs 1 lakh deduction available under sections 80C, 80CCC and 80CCD read with section 80CCE of the Income Tax Act. Infrastructure bonds help in intermediating the retail investor's savings into infrastructure sector directly. Long term infrastructure Bonds by IDFC IDFC issued an earlier tranche of these long term infrastructure bonds on November 12, 2010. This is the second public issue of long-te...

Section 80CCD

Top SIP Funds Online   Income tax deduction under section 80CCD Under Income Tax, TaxPayers have the benefit of claiming several deductions. Out of the deduction avenues, Section 80CCD provides t axpayer deductions against investments made in specific sector s. Under Section 80CCD, an assessee is eligible to claim deductions against the contributions made to the National Pension Scheme or Atal Pension Yojana. Contributions made by an employer to National Pension Scheme are also eligible for deductions under the provisions of Section 80 CCD. In this article, we will take a look at the primary features of this section, the terms and conditions for claiming deductions, the eligibility to claim such deductions, and some of the commonly asked questions in this regard. There are two parts of Section 80CCD. Subsection 1 of this section refers to tax deductions for all assesses who are central government or state government employees, or self-employed or employed by any other employers. In...

ULIP Review: ProGrowth Super II

  If you are interested in a death cover that's just big enough, HDFC SL ProGrowth Super II is something worth a try. The beauty is it has something for everybody — you name the risk profile, the category is right up there. But do a SWOT analysis of the basket, and the gloss fades     HDFC SL ProGrowth Super II is a type-II unit-linked insurance plan ( ULIP ). Launched in September 2010, this is a small ticket-size scheme with multiple rider options and adequate death cover. It offers five investment options (funds) — one in each category of large-cap equity, mid-cap equity, balanced, debt and money market fund. COST STRUCTURE: ProGrowth Super II is reasonably priced, with the premium allocation charge lower than most others in the category. However, the scheme's mortality charge is almost 60% that of LIC mortality table for those investing early in life. This charge reduces with age. BENEFITS: Investors can choose a sum assured between 10-40 times the annualised premium...

Merger of Tata Indo-Global Infrastructure Fund with Tata Equity Opportunities Fund

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300 Merger of Tata Indo-Global Infrastructure Fund with Tata Equity Opportunities Fund Tata Mutual Fund has decided to merge Tata Indo-Global Infrastructure Fund with Tata Equity Opportunities Fund, with effect from January 16, 2015.   Investors of Tata Indo-Global Infrastructure Fund can redeem/ switch out units from December 13, 2014 to January 12, 2015 without paying any exit load. For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call Leave a missed Call on 94 8300 8300 Leave your comment with mail ID and we will answer them OR You can write back to us at PrajnaCapital [at] Gmail [dot] Com --------------------------------------------- Invest Mutual Funds Online Invest Any Mutual Fund Online Download Mutual Fund Application Forms from all AMCs Download Mutual Any Fund A...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now