The Indian investment market is now flooded with many options like mutual funds, systematic investment plans, provident fund schemes, etc. Amidst all these high-yielding options, a recurring deposit is the most preferred. It is because of its assured returns with flexible investment. It is an advanced version of the fixed deposit that allows you to invest without a lump sum corpus.
It is simple to understand and involves lower risk compared to other investment alternatives. You earn decent interest to fulfil your short-term financial goals that get credited upon maturity. There are many benefits associated with it.
Here are some of them:
Online maintenance: It is the advantage of the increasing number of banks and financial companies operating digitally. You can now open the RD account, update details, track its functioning, etc., online. You can also automate your monthly deposits from your savings or current account. Hence, it is easy to maintain.
Easy investment: It is the best option that provides fixed and assured returns flexibly. If you are a salaried individual, you can set aside a part of your income to earn interest. This way, you do not have to worry about accumulating corpus to invest. You also do not have to fuss over fluctuating market rates.
Small deposits: It is a flexible investment option that allows you to make small investments. Public sector banks let you start with about Rs. 100 and private sectors have a range between Rs. 500 to Rs. 1,000. It aims for the inclusion of all individuals and not limiting them with a corpus requirement. Hence, encouraging savings with sustainable returns.
Tax benefits: Tax gets deducted at 10% on the recurring deposit account when the interest amount exceeds Rs. 10,000. You can counter such a deduction if your income is below the tax limit by submitting form 15G/15H.
Higher interest: It is a mix between a savings account and a fixed deposit. The small investment amount at regular intervals represents the former, and set and assured returns are similar to the latter. This makes it an ideal investment option. It also has interest compounding quarterly giving you decent earnings on the principal amount.
Fulfil short-term goals: It is a simple investment instrument that gives you promised gains no matter the market conditions. The same does not apply for mutual funds and other market operated financing as they yield high interest only in the exemplary market scenario. It makes them unsuitable for short-term goals. Hence, it is best to opt for an RD account for such targets.
It is an investment option that you can maintain easily through banking apps.