Home Finance Post Office Recurring Deposit Vs. Post Office Fixed Deposit

Post Office Recurring Deposit Vs. Post Office Fixed Deposit

by Ali Haider
fixed deposits

Once you agree and pay them, you will be asked what you want them to do with the money. You can open an RD with an amount of, say Rs. RDs are recurring deposits. 

You are required to notify the bank of a date on which the same amount will be deducted from your savings account with them every month that you determine with an FD rate calculator. 

After a year, you agree to do this, and the entire amount will be returned to your savings account. Recurring and fixed deposits earn a fixed interest rate with the security of money. Many investors are confused about where to invest, which makes them confused about where they should invest. Deposits that are recurring and those that are fixed differ substantially.


Investing in recurring deposits involves setting a fixed amount of money that an investor will regularly pay over a specified period. The purpose of a fixed deposit is to invest a specified amount of money for a specified period of time at a post office FD rate of interest. One-time investments are fixed deposits, while regular investments are recurring deposits. 

One can open a recurring account with the post office and banks, but an FD can be opened with the post office, banks, and non-banking financial companies. Consider, for example, a five-year fixed deposit of Rs 1,00,000 at an interest rate of 8%. 

There is only one deposit of Rs 1 lakh that he needs to make for five years. Alternatively, if someone invests Rs 10,000 per month for 5 years at 8%, they can do it in a recurring deposit. For five years, he must invest Rs 10,000 every month.


Fixed deposits and recurring deposits are taxed equally. RD and FD interest are taxed according to the investor’s income tax slab as part of his income. Furthermore, RDs/FDs in banks that earn interest above 10,000 rupees now attract a 10% TDS. It is important to note, however, that TDS does not reduce tax liability; one must still pay the remaining tax when filing the income tax return. 

In the event that an investor’s total income (including interest earned) is not taxable, and this is when you get the TDS refunded. You can submit the filled Form 15G (for investors under 60 years of age) or Form 15H (for investors over 60 years of age) at all bank branches where an investor has RDs and FDs to avoid such TDS.

A fixed deposit is, as the name suggests, a fixed term deposit where you deposit a set amount in the bank for a designated period of time (say a year), and the bank informs you of the post office FD rates of interest earned on this deposit. You will be asked what you want to do with the FD once it matures. You can either renew it for another term or transfer the money to your savings. 


Investments in FDs yield a higher return than those in RDs because FDs are one-time investments, whereas investments in RDs are spread out over time. According to the table below, if an investor invests Rs 1.2 lakh in an FD at 8% for a year, then they do an RD at the same interest rate for one year for Rs 10,000 per month. It would have been better to invest all Rs 1.2 lakh in a lump-sum FD, even if he had invested the same amount in an RD for a year at the same interest rate as he would in an FD.

However, RDs still have a relative advantage over FDs, despite FDs giving higher returns. In RD, an investor does not have to invest all of his money at once but can instead invest it in equal tranches. For salaried investors, this is a great way to invest. Below are some of the highest interest-paying banks (on one year RD and FD) and NBFCs (on one year FD).