Recurring deposits are one of the best ways to save money every month. In fact, it helps to inculcate the savings habit. You must set aside money every month to save. You can opt for the tenure and the amount depending on your ability to save.
How do recurring deposits work?
RDs or recurring deposits are the most simplest form of investments. Let us say that you want to invest Rs 1000 every month. You can either open an account online or you can walk into any of the branches of a bank. If you opt for paying Rs 1000 every month after the 12th month, you would get Rs 12,000, plus accumulated interest.
You can choose a size of your amount or you can decide a lumpsum which you require at a future date. Say for example, you require a lumpsum amount after 1 year of Rs 1 lakh. Therefore, you can save Rs 8000 each month and the bank would also give you an interest on the same.
Is there a TDS on recurring deposits?
Yes there is a TDS that is applicable. In fact, the interest amount is very much taxable, like a bank deposit. Any interest over and above Rs 10,000 will attract a TDS. The tax deducted at source would be 10 per cent, just like bank deposits.
Why you should opt for RDs?
Recurring deposits are the best way to save for the future. For example, if you anticipate marriage 2 years down the line, you can start putting in RDS for the nest 24-months. By the end of the tenure you would receive a lumpsum to meet expenses.
If you have gathered a decent sum after 1 year, you can place the same in a fixed deposit and continue your RD a fresh. You will not believe the amount you can save. Do not forget the interest component.
We suggest that you take a more longer term tenure of say 2 years at the very least.