Recurring Deposit
Key Takeaways:
Different types of RD accounts are designed for different financial needs and investor profiles.
Regular RDs help build a disciplined savings habit through fixed monthly contributions.
Special RD options are available for senior citizens, minors, NRIs, and flexible-income earners.
Choosing the right RD depends on your income pattern, financial goals, and investment needs.
Different types of RD accounts are available for different needs, whether you are a salaried employee, student, retiree, parent, or NRI. In this guide, we will explain what an RD is, explore the various account types, and help you understand which one may suit your financial goals.
What Is a Recurring Deposit (RD)?
A recurring deposit (RD) is a savings option offered by banks, NBFCs, and post offices where you deposit a fixed amount every month for a chosen tenure and earn interest on your savings. An RD helps you build savings gradually through regular monthly contributions.
Check out our blog – What is RD? & How RD Works?
What Are the Different Types of Recurring Deposits?
Types Of RD Account | Who It’s For | Key Benefit | Tax Treatment |
|---|---|---|---|
Regular RD Accounts | Salaried employees, students, homemakers, and regular savers | Builds disciplined monthly savings with guaranteed returns | Interest earned is taxable according to the income tax slab. TDS may apply where applicable |
RD Accounts for Senior Citizens | Individuals aged 60 years and above | May offer higher interest rates than standard RDs | Interest is taxable, though deductions under Section 80TTB may apply |
RD Accounts for Minors | Parents or guardians saving for children | Supports long-term goals such as education planning | Interest may be clubbed with the parent’s income under applicable tax rules |
NRE/NRO Recurring Deposit | Non-Resident Indians (NRIs) | Helps save and manage overseas earnings in India | Tax treatment depends on account type and regulations |
Tax Saving Recurring Deposit Account | Investors looking for tax-related benefits | Encourages regular saving while helping investors align deposits with broader tax planning goals | Tax treatment depends on the product and the bank terms |
Flexi or Variable RD | Freelancers, self-employed individuals, and business owners | Allows flexible contribution amounts | Interest remains taxable according to applicable rules |
1. Regular RD Accounts
Feature: This is the standard recurring deposit account where you invest a fixed amount every month for a fixed period.
Best for: Salaried employees, students, homemakers, and individuals with a stable monthly income.
Example: Priya deposits ₹3,000 every month for three years to create a travel fund.
2. Senior Citizen Recurring Deposit Accounts
Feature: Many banks provide slightly higher interest rates for senior citizens.
Best for: Retirees and senior citizens looking for stable returns.
Example: Mr Sharma, aged 65, opens an RD and receives a slightly better interest rate than standard RD accounts.
3. RD Accounts for Minors
Feature: These accounts are opened by parents or guardians on behalf of children.
Best for: Parents planning future expenses such as education or higher studies.
Example: Parents invest ₹2,000 monthly in an RD to build savings for future education expenses.
4. NRE/NRO Recurring Deposit Accounts
Feature: These RD accounts help NRIs save and manage earnings in India.
Best for: Non-resident Indians wanting structured savings plans.
Example: An NRI working in Dubai deposits a fixed amount monthly into an NRE RD account for future family expenses in India.
5. Tax-Saving Recurring Deposit Accounts
Feature: Some recurring deposit accounts may provide tax-related benefits depending on the institution and structure.
Best for: Investors looking to combine savings with tax planning.
Example: A working professional opens a tax-oriented recurring savings product as part of yearly tax planning.
6. Flexi or Variable RD Accounts
Feature: These accounts allow flexible monthly contribution amounts instead of fixed instalments.
Best for: Freelancers, self-employed professionals, and business owners with irregular income.
Example: A freelance designer deposits ₹5,000 one month and ₹8,000 the next month based on project income.
Check out our blog – Is Recurring Deposit Taxable?
How to Select the Right RD Account for Your Needs
Choosing the right recurring deposit depends on your financial goals and income pattern.
If you have a fixed monthly income, a regular RD can help create a disciplined savings routine.
If you are planning for your child’s future, a minor RD account can support long-term goals such as education planning.
If you are retired, a senior citizen RD account may offer slightly higher interest rates than standard RD accounts.
If your income changes frequently, flexi RD accounts may suit freelancers and self-employed individuals better.
If you are an NRI, an NRE/NRO RD account can help manage overseas earnings and savings in India.
If you want structured monthly savings, a regular RD account remains one of the simplest options for consistent savings.
Interested in Building a Regular Savings Habit?
Freo can help you start your savings journey with flexible options designed around your financial goals.
FAQs
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.
Naina Rajgopalan
Naina Rajgopalan has a thing for numbers and a deep fascination to learn about all things finance. She's been money-wise from a young age and has always shared her knowledge and tips with those around her. Being a part of the content team at Freo, a neobank that offers flexible and customised financial products, along with benefits such as insurance on balance, safe & secure banking, and so on, Naina stays updated with the latest of what happens in the banking and fintech industries. She has taken upon herself to share her knowledge with readers across all walks of life to help them manage their finances and budgets better, so they can make better decisions while spending, borrowing, investing and saving.
