Financial Advice on Fixed Deposit or Recurring Deposit

FD vs RD 2- Deepti, Delhi What is best to invest ...FD or RD. Is the income from RD taxable or not. RBI is expected to announce rate cut in coming months. So this is a good time to start FD and RD when the interest rates are slightly on a higher side. If you are looking for a lump sum investment, FD is a better option over RD. For example, under the assumption that both FD and RD are paying same interest rate, investing 12,000 in FD will give earn you more interest than investing 1000 per month in RD. This is because of the compounding difference. In RD's since you do monthly payment, the interest added differs i.e. After the first month you get interest on 1000, after second month you get interest on 2000+ the interest earned in the first month. So after end of 1 year you receive more interest in FD than RD. Having said that, RD is a good option if you don't have huge amount of savings and willing to start saving money. Both FD and RD carry different types of tax benefits. FD's with a tenure of 5 years or more are eligible for tax savings under section 80C. RD's do not hold such tax advantage. You can only defer tax payment i.e. you pay the tax on interest earned on RD only once you encash your RD. From your query, it appears as if you are a risk averse investor. You can even consider investing in corporate short term and corporate medium term bonds. Since RBI is expected to announce rate cuts in this financial year, these asset classes are can give good yields.