When it comes to making financial decisions about investments, there are several avenues available in the online marketplace. Among them, the most popular ones are fixed deposits and recurring deposits. Many of us get confused between fixed deposits and recurring deposits as both promise a fixed return and less risk. Below are the differences between the fixed and recurring deposit schemes:
Fixed deposit is one of the most popular investment schemes that come with a guaranteed return. There is no risk involved in a fixed deposit investment. Under this scheme, a lump sum amount is locked with banks or Non Banking Financial Institutions (NBFC) for a fixed period at a certain rate of interest. The rate of interest offered by banks or NBFCs varies with the tenure of your fixed deposit scheme. At the end of this tenure, you will receive the amount along with your interest.
The standard fixed deposit is the most commonly chosen investment option. Its tenure ranges from 7 days to 10 years. The interest earned on a standard fixed deposit is higher than the interest earned on the money kept in a normal savings account.
If you are choosing a cumulative standard fixed deposit scheme, the interest, which is compounded monthly, quarterly and annually, is payable on the maturity of the fixed deposit.
The interest gained in a non-cumulative fixed deposit scheme is credited on an annual, monthly, and quarterly basis. On maturity of the fixed deposit, you will receive your principal amount.
This is a 5-year fixed deposit scheme option to save tax under Section 80C of the Income-tax Act 1961. Through it, the Income Tax Department provides Indians with an option to claim an annual tax exemption of up to Rs 1.5 lakhs by investing in this tax-saving instrument. The interest rate at present on tax-saving FDs range between 5-6%.
A saving, as well as an investment option, investing in recurring deposits, is one of the best ways for individuals to develop a wealth-building habit. It teaches youngsters how to save a small amount of money each month from their salary. The tenure for recurring deposits are in the range of 6 months, 12 months, 2 years, 3 years or 10 years. The best part about recurring deposits is that you can withdraw the invested amount at any point in time. It works like your emergency fund if you are making recurring deposits for a short-tenure.
If you have any more questions related to the differences between Fixed Deposits and Recurring Deposits, Shriram City Union Finance Limited is happy to resolve all your queries and concerns. We are known for offering the best and most secure recurring deposit and fixed deposit options. We have been serving the Indian financial marketplace for almost 45 years. Our deposit schemes are accredited MA++/ with a stable outlook rating by ICRA. Check our latest Shriram city recurring deposit interest rate and fixed deposit interest rate for 2021.