Features and Benefits of Investing in RD

Features & Benefits Of Investing In Recurring Deposit

09^th Apr 2024...

Key Takeaways

A Recurring Deposit is a systematic savings plan that allows fixed monthly deposits for a set tenure with guaranteed returns.
Recurring deposit encourages regular saving habits and provides a secure, low-risk investment option with predictable maturity value.
RD accounts can be opened with minimal investment, often starting from Rs. 100, making them accessible to all income groups.
Depositors can avail loans against up to 95% of their RD balance in case of financial needs.
Interest earned up to Rs. 10,000 is exempt from TDS, with additional relief available through Form 15G/15H.
Senior citizens enjoy extra tax benefits under Section 80TTB on RD interest income.
Kotak811 enables easy online RD account opening, combining convenience, security, and goal-based savings management.

Today, investing is an important part of a secure financial life ahead. Now, choosing the right types of investments is sometimes a major confusion. However, the best way to get the most out of your investment is to put money where you can see it growing every day.

A Recurring Deposit (RD) is one such decent option. When you invest in RD, you have to put out money once every month and watch your savings grow. With this blog, we will learn the many advantages of an RD account and how opening a zero balance saving account online with banks like Kotak Mahindra can be a good option.

What is a Recurring Deposit (RD) Account?

A Recurring Deposit (RD) account is a popular investment option offered by financial institutions like banks. It's a systematic savings plan where individuals deposit a fixed amount regularly, typically every month, for a predetermined period.

The RD tenure can vary from a few months to several years. A significant benefit of an RD is its simplicity – it's accessible to everyone, from salaried individuals to students.

People prefer RDs for various reasons:

It promotes a regular savings habit, promoting financial discipline.
It provides a fixed and guaranteed return at the end of the tenure, making it a low-risk investment option.
Opening an RD account is simple, no documentation required.

It's a fantastic tool for those seeking a steady and secure approach to wealth accumulation.

Must Read: What Is Recurring Deposit Account (RD) & How It Works?

Key features of RD

When you invest in an RD account, it becomes an accessible and flexible way to save money. Here are the key features that make RD a popular investment choice:

Low Initial Investment: RD accounts can be initiated with as little as Rs. 100, making it a feasible option for various income groups.
Fixed Instalments: The instalment amount for most RDs remains fixed and needs to be deposited on the same day each month. Some schemes also offer flexibility with quarterly or half-yearly instalments.
Uniform Maturity Date: All RD instalments mature on the same day, simplifying tracking and management.
Flexible Tenure: While there might be a minimum tenure, the overall duration of the RD is flexible, catering to the needs of the depositor.
Comparable Interest Rates: RDs offer interest rates similar to fixed deposit accounts, providing a reliable return on investment.
Tax Benefits: No tax is deducted on the interest earned if it is at most Rs. 10,000. Depositors can submit Form 15G/15H to request an exemption from the tax deduction.
Loan Facility: Depositors can avail loans against their RDs, allowing them to access up to 95% of the RD amount in case of financial requirements.
Taxable Interest: The interest earned on an RD is added to the taxable income of the depositor, and appropriate tax regulations apply.

Must Read: Recurring Deposit Vs. Fixed Deposit

Benefits of opening an RD account

When you open a zero balance savings account online, you get benefits on RD, here are the major ones:

Goal based saving: A recurring deposit is an excellent tool for goal-oriented savings. A recurring deposit calculator lets you precisely determine the total maturity amount, making it ideal for short-term fund requirements like education expenses, wedding plans, or travel funds. RDs facilitate systematic and steady savings growth.
Loan against RD: While premature withdrawal is restricted, RD holders can leverage a loan against up to 90% of the recurring deposit balance. This feature provides financial flexibility without compromising the investment.
Saving for minors: RDs offer a valuable avenue for parents and legal guardians to save for a child's future education expenses. Just before the academic year starts, timely maturity ensures funds are available for school fees.
Tax breaks for senior citizens: Senior citizens benefit from a deduction of Rs. 50,000 under Section 80TTB of the Income Tax Act. It includes interest earned on RDs, making it an attractive investment with added tax advantages.
TDS relief: Banks refrain from deducting tax on recurring deposit interest unless the total interest exceeds Rs. 10,000 in a financial year. Depositors can further seek relief from TDS provisions by submitting Form 15G/15H.

How to start an RD account?

Here’s how you can open an RD account:

Using mobile banking:

Select "Investment" and "Fixed/Recurring Deposits."
Open a Recurring Deposit.

Open your RD with a Kotak 811 savings account

Experience the ease of financial planning with a Kotak 811 bank account by seamlessly opening an RD alongside your savings account. Kotak 811 ensures a simple and fast account setup process, making it an excellent choice for hassle-free RD investments.

Kotak 811 Mobile Banking App empowers you to monitor and manage your RD effortlessly, providing a secure and trusted banking experience. Open your RD today and enjoy the convenience of goal-oriented and systematic investments.

Popular Searches on Kotak811

This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empanelled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees, and contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.