Are you seeking a flexible approach to saving money? A recurring deposit (RD) account might be what you’re looking for! So, what is a recurring deposit? It’s a unique type of savings account that may be opened at banks, NBFCs, or even post offices. It works like this: you deposit a set amount of money every month for a fixed time and get a lump sum at the end of the term – It could be a year, 5 years, or more. This article is here to familiarise you with various types of RD accounts so you can choose the one right for you. Let’s dive in & discover types of recurring deposit accounts!
Check out our blog – What is RD? & How RD Works?
What are the Types of RD?
Recurring deposit accounts are a great way to save money and earn interest over a period of time. There are various RD account types to suit different needs. The most significant 5 types of Recurring Deposits (RD) include Regular RDs, Senior citizen’s RD accounts, RDs for minors, Tax saving RDs & NRE RD account, offering different features and flexibility in deposit amounts and tenure.
Overview of Types of Recurring Deposit Accounts
|Types Of RD Account||Overview|
|Regular RD Accounts||This is the most common RD account that enables account holders to deposit a certain amount into the account once each month for a time period in order to receive a set interest rate on the deposit amount.|
|RD Accounts for Senior Citizens||Specially made for seniors. They should anticipate getting an extra 0.50% to 0.75% in interest over ordinary rates through these RD types.|
|RD Account for Minors||Such accounts will be established for minors only; however, this is only feasible under the supervision of their parents or guardians.|
|NRE Recurring Deposit||This type of RD account is connected to your NRE account. NRE accounts allow you to deposit international earnings in the currency of your foreign country of residence.|
|Tax Saving Recurring Deposit Account||Such type of RD Account helps you save your tax under the section 80C of the Income Tax Act, 1961|
Regular RD Accounts
Did you know that most Indian banks and NBFCs provide a fantastic investing opportunity called the RD scheme? It’s pretty simple to get started; all you need to do is be at least 18 years old and select a regular deposit amount and duration. The interest rate can be computed on a simple or compound basis, depending on the bank. One crucial aspect to keep in mind is that you will be unable to deposit more funds throughout your current term, but you will be able to withdraw a lump sum at the conclusion of it. Just remember to verify with your bank to see what the minimum deposit amount is and what terms are available.
RD Accounts for Senior Citizens
As you grow older, your sources of income decrease. On the other hand, the healthcare and additional costs increase. So you would agree that senior citizens must have some extra benefits. Well, they do! Did you know special Recurring Deposits (RDs) are available for elderly citizens? Even better, most banks give a more rate of interest on RDs opened by older folks. Typically, you should anticipate getting an extra 0.50% to 0.75% in interest over ordinary rates through these RD types. If you are a senior person wanting to invest your funds, RDs may be a good option for you!
RD Account for Minors
Did you know that certain banks allow you to create RD accounts with the help of your parents or guardians, even if you are under 18? This is an excellent chance to start building wealth from an early age. And parents can also leverage these types of recurring deposits to invest in their children’s future, particularly in terms of education. Furthermore, you’ll be pleased to learn that the interest on these RD accounts may be just as excellent, if not better, than those on other accounts. So, without a second thought, you must take advantage of this opportunity and begin investing in your child’s bright future.
NRE Recurring Deposit
If you are a Non-Resident Indian (NRI), You may open Non-Resident External (NRE )RD accounts. With these types of RDs, you may earn a reasonable interest rate and save money monthly on income made both within and outside India. It’s an excellent method to put your money to work for you even if you are not in the country. Also, you need not worry about currency exchange and transfer charges whenever you need to do a financial transaction in India. You can make payments on maturing of your RD accounts.
Tax Saving Recurring Deposit Account
One crucial financial fact is that the interest you earn on your recurring deposit account is taxed. However, the amount of Tax Deductible at Source (TDS) depends on your annual income. As a result, if you make a good living, you may have to pay more TDS. Still, it takes away a little chunk from your interest which you must be aware of. For instance, if your annual income is between 5 lakhs to 10 lakhs, the bank can charge you around 10% TDS on your income earned from the interest of your RD account. There are different slabs for different earning brackets. You can enquire with your bank and choose the one that helps you save maximum tax.
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Check out our blog – Is Recurring Deposit Taxable?
Why Get a Freo Savings RD Account?
Are you looking for a reliable way to grow your savings? Look no further than Freo! With interest rates of up to 8.7%, Freo is a smart choice for anyone who wants to see their money work harder for them. Plus, you can rest easy knowing that your savings are backed by Equitas Bank.
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Can I make monthly deposits into my RD account using different amounts?
No. A standard RD account will not allow you to deposit various sums each month. However, some banks provide pliable RD plans in which you can deposit many times monthly and in varied amounts.
Is it possible to get my interest payment every month?
Yes, interest can be paid out monthly, quarterly, half-yearly, or annually under the cumulative recurring deposit system.
Is it feasible to avoid paying taxes on monthly deposits?
Yes, recurring deposits can save tax if the money is put in any type of recurring deposit account for a long time.