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Wednesday, June 2, 2021

Common Features Of Fixed And Recurring Deposit Accounts

The most popular investment options among Indians are fixed and recurring deposit account. These are considered safe owing to their risk-free and predetermined returns. You get your invested amount with an interest rate that is higher than regular savings. These are lucrative choices to gain on your funds irrespective of your age or occupation.

Both of them are distinctive in terms of the interest pay-out, investment frequency, minimum funds requirement, tenure, etc. However, there are many similarities when it comes to their characteristics. This aspect, along with the distinctive factors, is important in choosing between the recurring and fixed deposit type.

Here are some of the similar attributes they share:


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Assured returns: The recurring and fixed deposit interest rates get prefixed as you open the account. This remains constant throughout the investment term. Hence, you can rest assured knowing that your prospective earnings are safe. This is not the case with mutual funds and other money market instruments. Therefore, if you have a low-risk appetite, it is best to go with these safer options.

Taxation norms: The tax deducted at source is only applicable when your interest amount exceeds Rs. 10,000 for a recurring deposit. The same applies for fixed investments, except the current limit for exemption has increased to Rs. 40,000. You can also get a tax exemption if you do not fall under the tax slab. You need to submit a declaration form 15 G or H for the same.

Premature withdrawal rules: It is recommended to retrieve your principal amount along with the accrued interest only upon maturity for term deposits. However, if you have to withdraw due to emergency reasons, you can do so with a penalty. Both FD and RD are subject to a premature withdrawal fee deducted by lowering the interest rate for the outstanding tenure.

Loan facility: You can use the funds in your fixed investment and RD account as collateral to get credit. Banks and financial institutions sanction up to 90% of the principal amount you have a loan. It makes these deposits a lucrative option to earn returns and assist with emergency funds.

Nominee provision: Banks allow you to select your spouse, parents, children or a close guardian as a nominee for your deposit. This lets them benefit from the funds in case of your demise. It is a facility provided for all kinds of bank accounts, including savings and current account. The online banking apps are also an added convenience to manage all of them efficiently.

Future goals planning: You get an idea of the gains you can expect owing to the predetermined rates. You can use this information to link your financial agendas with these deposits. For instance, you can open dedicated accounts for purposes like wedding, child’s education, international trip, etc.

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