Recurring Deposits (RDs)

POSTED BY justgrowmymoney ON December 23, 2011 1:59 pm COMMENTS (7)

1) What happens when one takes a 5 year RD and stops paying after, say, 5 months?
2) Can one take a RD of 1000 per month for 5 years and if having surplus during some months make a higher contribution (Say Rs. 1500)?

My intent is to lock in the current high RD rates [which in my analysis, will not last longer] as part of my overall asset allocation across Euity and Debt but I am not too interested in putting large monies in RDs.

7 replies on this article “Recurring Deposits (RDs)”

  1. madhurajoshi says:

    Recurring deposits are really profitable in these days because today almost all banks offers very good return on these type of deposit.I just open a recurring deposit account with Axis Bank.

  2. Thanks folks for the responses.

  3. Dear Kanchan, please do not look for quoted returns. Please check the tax adjusted returns.

    Thanks

    Ashal

  4. Dear justgrowmoney, your basic query is already answered by dear Prashant & dear Narayan. Here is my input. This very same Rd’s return may look very less in the future after 5Y. The reason ‘ll be the tax liability on the interest earned from this RD. As on date RDs are not liable to TDS but it does not mean that the interest from a bank RD is tax free.

    The actual impact may be higher due to your change of tax slab from 10 to 20 or 30% depending upon the income rise for you.

    Keep this aspect also in your mind while investing in Bank RDs.

    Thanks

    Ashal

  5. kanchan gupta says:

    Recurring deposits are quite profitable in terms of the returns they offer.

  6. Narayan says:

    1. You will at best get a pro rata interest on such deposits if you are lucky. But for 5 months; you may actually get no more than the savings bank interest rate depending on the policy adopted by the particular bank.
    2. As Prashant points out; you can have an increasing RD; within limits set by the bank.
    Narayan

  7. Prashant says:

    To answer your second question , there are a couple of banks which do provide variable/higher contribution.
    I personally know that union bank of inda has the facility as i have one , the condition as below
    – If you have started a 1000 rd you have to pay atleast that amount
    – You can pay extra 10 times the RD value , in our example it will be 10000

    check the below link
    http://www.unionbankofindia.co.in/personal_deposit_union_monthly_plus.aspx

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