Which plan is best for you? Know where you will get the most benefit:

In Recurring Deposit (RD), you deposit a lump sum amount every month. This plan is ideal for those who want to invest a small amount every month to build a fund for the future. You can start with ₹500 or ₹1000 and gradually build a good fund.

FD requires a lump sum investment, while RD involves small monthly deposits. If your current balance is high, FD is better, but if you can save a little every month, then there is no better option than RD.

Interest rates on FDs generally range from 3% to 7%, while interest rates on RDs can vary around 0.25%. Many banks also offer attractive interest rates on RD, but interest rates on long term FDs are higher.

Income tax is payable on the interest earned on both FD and RD. If your annual income falls in the tax slab, interest is considered as income. However, to save tax, you can opt for tax-saving FD (5-year).

The money in an FD is locked for a fixed period, but you can also open a break FD if needed, although there may be a penalty for this. Withdrawal from RD is usually difficult. Therefore, choose your investment period wisely.

If you are investing for a long term and can invest a lump sum, then you will get higher interest on FD. Although the interest on RD is slightly lower, it is beneficial for small savers as a large sum can be created through disciplined investment.