The best way to increase your deposit collection and start investing is to keep investing regularly. Investing in regular installments not only helps in saving, but they also bring discipline in the investors. One of the most popular investments that matches all the above details is the Recurring Deposit or RD. Read this simple guide to know what is the meaning of Recurring Deposit Account and what are the benefits of Recurring Deposit Account.
What is a Recurring Deposit Account?
A recurring deposit is a deposit that consists of fixed installments that have to be invested in the account at a fixed time interval for a pre-specified period. Since installments recur at regular intervals or are liable, it is called recurring deposit. This is the meaning of recurring deposits.
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Different banks may specify different installment frequencies ie monthly, quarterly or half-yearly. The most popular option offered by most banks is the monthly installment system. In this, the depositor has to pay a pre-determined amount in a recurring deposit account every month. The investor can determine the installment amount subject to the minimum rules set by the bank. Rupee. A recurring deposit account can be opened even with a minimum installment of 100.
What is a Recurring Deposit Scheme?
Let us know what is meant by recurring deposits
For a recurring deposit, the depositor has the option to choose his term. The bank may also have special schemes where you will have to deposit a fixed installment for a specified period. However the depositor can decide how long he wants to invest. Standard minimum duration is 6 months and maximum duration is 10 years.
All recurring deposits are completed on the same day.
Installments in a recurring deposit account will be credited or credited on a fixed day per month, quarterly or half-yearly, as applicable.
Generally, the rate of interest offered on recurring deposits is the same as the rate of interest offered on term deposits offered by the bank for the same period.
Premature withdrawal is not allowed in recurring deposits. In case of premature withdrawal, the bank cuts the interest rate as a penalty. On premature withdrawal, the interest is charged less than the actual rate and this is the penalty.
What is the benefit of Recurring Deposit?
A Recurring Deposit Account is an excellent investment option especially for those who do not have a large amount available to invest. There are many benefits to investing in a recurring deposit account.
Goal Based Savings:
The best advantage of Recurring Deposit is that it can be used for a specific purpose for goal based savings. By using a recurring deposit calculator you can know how much amount you will get on maturity. This is particularly useful for short-term funding requirements such as spending for education or saving for wedding or travel expenses. Recurring deposits can help to increase your savings in a planned way.
Loan against Recurring Deposit:
Although premature withdrawal is not allowed in Recurring Deposit, it is possible to take loan against the balance in Recurring Deposit. Most banks provide 90% loan against the balance in recurring deposits.
Savings for minors:
Banks allow parents and legal guardians to open a recurring deposit account for minors. It can be used as an effective way to save for the expenses of education of the child. Recurring deposits can mature just before the start of the child’s school year, thus meeting the school fee requirement.
Tax exemption for senior citizens:
For interest earned to senior citizens under section 80 TTB of Income Tax Act, Rs. 50,000 is deducted. This includes interest earned on fixed deposits, recurring deposits, savings accounts and any other type of interest. This makes the Recurring Deposit Account more attractive for investment, which results in a deduction on the income earned.
Relief from TDS:
The bank does not deduct tax on interest earned on recurring deposits unless the total interest earned on all deposits in a specified financial year exceeds Rs 10,000. However, by submitting Form 15G / 15H, the depositor can get relief from TDS provisions.
