Fixed Deposit vs Recurring Deposit — what's the difference?
A Fixed Deposit (FD) is a one-time lump sum investment that earns a fixed interest rate for a chosen tenure. A Recurring Deposit (RD) lets you invest a fixed amount every month instead, building up savings gradually while still earning FD-like interest rates — useful if you don't have a lump sum ready but can commit to a monthly amount.
Is FD/RD interest taxable?
Yes — interest earned on both FD and RD is fully taxable as "Income from Other Sources" at your income tax slab rate. Banks deduct TDS at 10% if your total interest from that bank exceeds ₹40,000 in a year (₹50,000 for senior citizens), but you're still liable for tax at your actual slab rate when filing your return.
Should I break my FD early?
Most banks charge a penalty (typically 0.5%-1% reduction in the applicable interest rate) for premature withdrawal. It's usually only worth it if you have an urgent cash need — otherwise, a loan against your FD (typically available at a small markup over the FD rate) can be cheaper than breaking it.