Skip to main content

Recurring Deposits

All About Recurring Deposits

Recurring deposits combine regular investing with guaranteed returns - making them an attractive option for risk averse investors




The recurring deposit (RD) is one of the most basic financial products available it the market. It can be used as a tool to inculcate the habit of saving.


What is a Recurring Deposit?
An RD is a type of term deposit offered by banks and non-banking financial companies. There are two types of RDs-regular and flexible. A regular RD is offered by all banks, while only some offer flexible ones. A regular RD allows you to deposit a pre-specified amount at pre-decided intervals. It becomes a compulsory investment. The instalment amount once fixed, cannot be altered. For instance, if you sign up with a bank to invest R1,000 every month for 12 months in a regular RD, you will have to invest the specified amount at a fixed date every month. In a flexible RD, you can deposit any amount, on any day, and any number of times. Other than visiting the branch to open an RD, nowadays many banks allow you to open using the Net banking facility as well.


How does it work?
 The tenure ranges from three months to 10 years. Some banks have a lock-in period of 1-3 months. The money you invest in an RD, earns interest, and it gets compounded. Data from Deals4loans shows that as of June, interest rates on RDs were in the range of 7-9.10% per annum, depending on bank and tenor chosen. Senior citizens get an additional 15-25 basis points as interest. (One basis point is one-hundredth of a percentage point.)


In a regular RD, in case of delayed instalments, a penalty is charged as a flat fee or a percentage of the amount. For instance, with ICICI Bank Ltd, the depositor is liable to pay monthly interest at the rate of R12 per R1,000, and it depends on time and the amount. If you withdraw the amount before the maturity date, you will have to pay 0.5-2% as penalty, depending on the tenure. You cannot withdraw partially.


Some banks allow you to take a loan against the deposit. Generally, the loan amount can be 75-90% of the deposit value. For instance, State Bank of India allows you to take a loan of up to 90% of the deposit amount at an interest of 0.5% per annum above the interest rate of the RD.


What should you do?
It can also be useful for those who do not have access to financial instruments such as equity or debt. If you are in the lowest tax bracket or have no taxable income and are looking for guaranteed returns, it may work for you.


However, you should know that since RDs come under the definition of time deposits, the interest earned will attract tax deducted at source (TDS). So, TDS will be applicable if the interest earned on the RD (or if you have more than one with the same bank) exceeds Rs 10,000. If you come below the income tax bracket, you can avoid the TDS by filing Form 15G or 15H.



Debt Funds are better than Recurring Deposits





Invest Rs 1,50,000 and Save Tax upto Rs 46,350 under Section 80C. Get Great Returns by Investing in Best Performing ELSS Funds

Top 10 Tax Saver Mutual Funds for 2017 - 2018

Best 10 ELSS Mutual Funds to invest in India for 2017

1. DSP BlackRock Tax Saver Fund

2. Invesco India Tax Plan

3. Tata India Tax Savings Fund

4. ICICI Prudential Long Term Equity Fund

5. Birla Sun Life Tax Relief 96

6. Franklin India TaxShield 

7. Reliance Tax Saver (ELSS) Fund

8. BNP Paribas Long Term Equity Fund

9. Axis Tax Saver Fund

10. Birla Sun Life Tax Plan



Invest in Best Performing 2017 Tax Saver Mutual Funds Online

Invest Best Tax Saver Mutual Funds Online

Download Top Tax Saver Mutual Funds Application Forms


For further information contact SaveTaxGetRich on 94 8300 8300

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

Leave your comment with mail ID and we will answer them

OR

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

OR

Call us on 94 8300 8300



 

Popular posts from this blog

Term insurance

Term insurance may not be the most-marketed product by life cos, but it’s a must-have in today’s risk-prone lifestyle WHEN was the last time your insurance agent sold a term plan to you? It’s not a very popular policy among agents, as their commission in absolute terms is low because of the low-premium. Just as agents have their self interests in mind while selling, you need to make your own decision about your insurance needs, which are unique to your family. COST ADVANTAGE A term plan is pure protection. It is the cheapest type of life insurance policy. But what you see might not be what you get, most insurers have a range of health parameters for standard rates. If any of your health parameters — weight, blood pressure for instance fall outside this range, you will pay more. For some companies, the standard range is very narrow. EARLY BIRD GAINS A 30-year-old will pay 15% more premium than a 25-year-old. At 40, the premium is double of what is applicable for a 25-year old, points...
Read more

ICICI Prudential Balanced Fund

 ICICI Prudential Balanced Fund scheme seeks to generate long-term capital appreciation and current income by investing in a portfolio that is investing in equities and related securities as well as fixed income and money market securities. The approximate allocation to equity would be in the range of 60-80 per cent with a minimum of 51 per cent, and the approximate debt allocation is 40-49 per cent, with a minimum of 20 per cent. An impressive show in the last couple of years has propelled this fund from a three-star to a four-star rating. The fund has traditionally featured a high equity allocation, hovering at well over 70 per cent, which is higher than the allocations of the peers. But in the last one year, the allocation has been moderated from 78-79 per cent levels to 66-67 per cent of the portfolio. ICICI Prudential Balanced Fund appears to practise some degree of tactical allocation based on market valuations. Within equities, well over two-thirds of the allocation is parked i...
Read more

TDS Rate and Personal Account Number(PAN)

    The TDS rate doubles to 20% from 10% if you fail to mention your Personal Account Number   IF you run a glance through your pay slip, you will come across something called TDS, which is tax deduction at source. In most cases, the employer deducts this amount at the time of payment of salary itself and pays the total tax amount to the government on behalf of all the employees. If you are a self- employed or practicing professional s, you have to pay this amount yourself.    Tax deducted at source is one of the modes of income tax collection by the government. Under the income-tax laws, income tax at specified rates is required to be deducted while making certain payments.    The rate of deduction of tax at source on interest and rent payment is 10%. For salary payments, the employers deduct income tax at source on a monthly basis after computing income tax liability on estimated annual taxable income of the employee. Tax benefits on housing loan, investments, etc are consid...
Read more

L&T Tax Advantage

Best SIP Funds to Invest Online   The fund follows a growth approach to investing in quality stocks that have a large-cap tilt This large-cap tilted ELSS has fared consistently and fared better than its benchmark by posting a higher margin of outperformance. The fund follows a growth approach to investing in quality stocks that have a large-cap tilt, which is evident in its portfolio. The portfolio is further well diversified across market capitalisation and sectors with over 60 stocks finding a place in it. The upside with this fund is the fact that it has witnessed both down and up cycles of the market to come across as a winner in the long run. Do not doubt the fund based on its size and a few mediocre years of performance, because when analysing its rolling three year returns, the fund's performance stands out to qualify as a must have ELSS in one's portfolio. Stay invested through the lock-in and there are chances of benefiting from returns as well as tax savings will prov...
Read more

Tax Planning: Income tax and Section 80C

In order to encourage savings, the government gives tax breaks on certain financial products under Section 80C of the Income Tax Act. Investments made under such schemes are referred to as 80C investments. Under this section, you can invest a maximum of Rs l lakh and if you are in the highest tax bracket of 30%, you save a tax of Rs 30,000. The various investment options under this section include:   Provident Fund (PF) & Voluntary Provident Fund (VPF) Provident Fund is deducted directly from your salary by your employer. The deducted amount goes into a retirement account along with your employer's contribution. While employer's contribution is exempt from tax, your contribution (i.e., employee's contribution) is counted towards section 80C investments. You can also contribute additional amount through voluntary contributions (VPF). The current rate of interest is 8.5% per annum and interest earned is tax-free. Public Provident Fund (PPF) An account can be opened wi...
Read more
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