Investment
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Recurring Deposit vs SIP
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Same disciplined monthly habit, very different long-term outcomes. See the compounding gap.
Visual Comparison
Key Differences
| Feature | Recurring Deposit | SIP (Equity) |
|---|---|---|
| Returns | Fixed (6–7%) | Market-linked (8–15%) |
| Risk | Zero — guaranteed | Market risk |
| Tax | Taxable at slab rate | LTCG 12.5% above ₹1.25L after 1yr |
| Minimum amount | ₹100/month (most banks) | ₹500/month |
| Best for | Short-term savings goals | Long-term wealth creation |
When to Choose Which
Choose Recurring Deposit
- Saving for a goal in 1–3 years
- Need guaranteed corpus at maturity
- Risk-averse investor
- Emergency fund build-up
Choose SIP (Equity)
- Investment horizon 5+ years
- Can handle market volatility
- Want inflation-beating returns
- Building retirement or child education corpus
Frequently Asked Questions
For long-term wealth creation (5+ years), equity SIP historically outperforms RD significantly. RD is better for short-term goals requiring capital safety.
Both require fixed monthly contributions. RD gives guaranteed returns at a fixed interest rate. SIP in mutual funds gives market-linked returns that fluctuate but tend to be higher over long periods.
Yes. Bank RDs are deposit insurance covered up to ₹5 lakh per depositor per bank (DICGC). Returns are fully guaranteed.
RD interest is added to your taxable income and taxed at your applicable income slab rate. There is no TDS on RD interest below ₹40,000/year.
Yes, but most banks charge a penalty of 0.5–1% below the applicable rate for early withdrawal.