What is recurring deposit?

Recurring Deposit is a variant of term deposit offered by the banks with fixed monthly investment, fixed duration, and a fixed rate of interest throughout the tenure of the deposit. In Recurring deposit the customer deposits fixed amounts in small intervals for a long period and receive huge amount at the end of tenure.

The minimum deposit per month accepted in public sector banks is as less as Rs.10 to Rs.100/- and varies from Rs.500 to Rs.1000 in private sector banks. The main purpose of a RD is to develop the habit of saving on a regular basis.

How does Recurring deposit Work?

  • You can open your FD Account offline as well as online after logging on with your Internet banking username and password, and choose RD account online.
  • You can then choose the monthly deposit limit.
  • Choose the tenure of deposits.
  • Deposit the fixed amount every month.
  • At the end of tenure you can get the maturity amount (Deposit amount + provided interest).

Recurring Deposit: Eligibility Criteria

  • Any individual.
  • Any minor who is above 10 years of age is eligible to open a recurring deposit account if he or she provides proof of the name.
  • Any minor who is below or equal to 10 years of age under the guardianship of natural or legal guardian.
  • Any corporate, company, proprietorship or commercial organisation.
  • Any government organisation.

Recurring Deposit: Documents Required

  • Application form which can be obtained from the bank you select to open the recurring deposit account in.
  • Passport size photographs of the applicant.
  • Identity proof and address proof of the applicant willing to open the recurring deposit account.
  • KYC documents if the bank requests for it.


  • The rate of interest is equal to that offered for a Fixed Deposit and is hence higher than any other Savings scheme
  • RD offers the additional benefit of taking loan against the deposit, i.e., by using the deposit as a collateral. About 80 to 90% of the deposit value can be given as loan to the account holder.

Income Tax on Recurring Deposit Amount

  • The money that is invested in a recurring deposit every year, will be counted as a part of the yearly income of the investor.
  • ATDS (Tax Deducted at Source) of 10 percent is deducted on the interest you earn on your recurring deposit. The TDS is not deducted if the interest you earn on your recurring deposit is up to Rs.10,000.
  • The TDS will be 20 percent, if you fail to provide the PAN information to the bank.
  • If your income falls under the non-taxable income slab, you still have to submit the Form 15G to be taxed for both fixed and recurring deposits.
  • Here’s a list of Income tax slab rate for FY2021.


           Income Tax Slab   Individuals Below Age Of 60 Years
Up to₹2.5 lakh                               Nil
₹2.5 lakh – ₹5 lakh                               5%
₹5 lakh – ₹10 lakh                               20%
₹10 lakh                               30%

Interest Rate (%)

  • The interest rate will be same throughout the tenure of FD.
  • The interest rates may vary from one bank to another so please check with your bank for latest interest rates.

Fixed Deposit During Coronavirus/Covid-19

The Reserve Bank of India has announced repo rate cuts which may induce banks to reduce the interest rates on fixed deposits in the future.

LOCKIN Period for FD

  • Usually, the minimum lock-in period for an RD account is 5 years

Premature Withdrawal of Recurring Deposit

  • If the account holder withdraws the deposited amount before its maturity, the rate of interest that is received will be the one applicable to the period for which the deposit has remained with the bank. 1% penalty will also be levied by the bank for premature withdrawal of Recurring deposit.
  • However, some banks would deduct interest rate by 1% to 2% for the period during which the deposit remained in the bank in case of premature withdrawal.

 FD for Non-Resident Indian

NRIs can open fixed deposits in India. Two main types of fixed deposit they can open are NRE and NRO fixed deposits. Also, in case of NRE fixed deposits, the interest earned in India is tax free.