I guess most of you must have heard and know about recurring deposits. This article is especially for those who want to know about recurring deposits. The service is available in all the banks in India.
From nationalized banks such as SBI, and Vijaya bank to private limited banks such as ICICI, HDFC and also at the post office.
So, what is a recurring deposit? And how do you open recurring deposit accounts in the bank?
A recurring deposit is a deposit that enables you to save money at a monthly interval of time. You can open this account for 1 year to 10 years with attractive interest rates same as FD rates.
Monthly saving plans such as Recurring Deposits and SIPs help to inculcate discipline in saving money for the future. One of the most effective ways too, as it does not require a large amount to save.
It’s easy to execute by setting aside a few amounts from your earnings. Keep on saving these small amounts until eventually, it becomes a large corpus. You can go for a higher amount if you would like. That would only increase your savings capacity.
The tenor of deposits is from 12 months to 10 years. It is an interest-bearing account and its interest rate is the same as that of term deposit interest rates.
The subscription amount can be as low as Rs 100/- and there is no upper limit. That’s the beauty of it. Anyone can start this account anytime with zero risk.
Who Can Open RD Account?
Any individual can open a recurring deposit account at any designated bank or post office. Irrespective of age and gender, anyone can have this deposit account.
For minors, an account should be opened with a guardian. Account operation has to do by a guardian.
Where Can You Get It?
The facility is available at all the nationalized banks, private banks, state cooperative banks and post offices.
If you are unable to visit your branch, you can still avail of the facility over internet banking. All the popular banks have online facilities.
You can open online 24/7 throughout the year. The only thing is that there’s a cut-off time to do the transaction. If done beyond working hours, your request will be completed the next working day with an alert that goes to your registered mobile number.
Otherwise, the account number will be generated instantly. You can also set monthly payments as a Standing Instruction mandate. And no documentation is required to open online RD.
So, when you open a savings or current account, avail of internet banking. There are lots of things you can do on your own at your convenience.
For example, SBI has YONO (You only need one) internet banking where a maximum of transactions can be done by the user at his convenience.
Is It Taxable?
Deposit balance under recurring deposits is taxable under Income Tax Act same as fixed deposits.
If you submit a PAN card taxable amount will be 10 % of the interest earned provided the interest earned amount is above Rs 10000/- else it is 20% deductible as tax-deductible at source (TDS) as per Income Tax Act.
What do You need To Submit?
If savings or current account is already maintained in the bank branch then no fresh KYC documents are required. Just filling up of account form is sufficient.
If not, then KYC documents will have to be produced.
Online RD does not require any documentation. Everything is digital.
It’s 100 per cent Liquid
You can close your recurring deposit account anytime and take out your fund whenever you need. So, you can open multiple recurring deposit accounts and as per your needs, you can manage.
How Does It Work?
When you opened this account with the help of bank staff, you will get an account passbook where you will get all the details of your account.
You will see the following details on your passbook.
- Your account number,
- Your name and address,
- The tenor of the deposit, monthly deposit amount, maturity date and
- Maturity value.
Every month you can deposit manually or you can advise the mandate to debit your savings or current account, to credit to the recurring deposit account.
Accordingly, it will keep on depositing every month until your account matures. When it’s about to end, you will get a notification.
When the time has come, you have to advise your bank to close it and credit the whole amount to your main account.
Be aware that your monthly payment is going properly. Otherwise, the bank may impose a penalty on failed SI. That would badly affect the account when it matures.
Best Way To Safe Funds.
If you are unable to save bulk money or you want to save a few amounts every month without taking any risk, then choosing a recurring deposit account makes sense.
The downside of an RD is that since it’s a risk-free account, the return is not as good as compared to investment in stocks and the share market where risk is pretty high.
But a recurring deposit account is one of the most favoured money-saving plans for people of low-risk appetite such as low-income groups and senior people. Daily wage earners, People in the Unorganised sector and farmers are all the main investors of RDs.
Not specifically but in general views, otherwise it is seen that people of high-income groups spend money on RD for quick accumulation and pooling of funds. Such as when people plan for a vacation, RD is something that would help to pool funds for holiday expenses.
Enjoy saving money and let your money earn money!
2 thoughts on “Recurring deposits- Save money for future use!”
I am truly impressed by the details which you have provided regarding Recurring deposits. It is an interesting article for me as well as for others. Thanks for sharing such articles here.
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