Recurring Deposit: Under Recurring deposits are Fixed amounts are deposited at regular intervals for a fixed term and the repayment of principal and accumulated interest is made at the end of the term. These deposits are usually targeted at persons who are salaried or receive other regular income. A Recurring Deposit can usually be opened for any period from 6 months to 120 months. Any default in payment within the month attracts a small penalty.
Advantages of Recurring Deposits: Recurring Bank Account provides:
➤ Compulsion to save
➤ High rates of interest as compared to Term Deposits
➤ Liquidity to access those savings any time
➤ Helps to create a fund for your child's education or marriage of your daughter or buy a car without loans or save for the future
Since a recurring deposit offers a fixed rate of return, it does not provide protection against inflation. These are best if you wish to create a fund for your child's education or marriage of your daughter or buy a car without loans or save for the future.
Under these types of deposits, the person has to usually deposit a fixed amount of money every month (usually a minimum of Rs 100/- p.m.) using Standing instruction facility of the Bank to avoid any delays in payment. Any default in payment within the month attracts a small penalty. Fixed deposit interests have always been liable to deduction of tax at source. If the total FD interest in an individual/joint/ HUF/minor account exceeds Rs. 10,000, then the interest amount is liable to TDS. In budget 2015, it has been announced that RDS are liable to TDS if interest in a financial year exceeds Rs. 10,000
Customers can apply for NIL deduction of TDS on FDs and RDS by filling forms 15G and 15H, which are self-declaration forms. These forms are issued by each bank for deposits held by customers in those banks. Form 15G applicable for all customers. Form 15H, applicable for senior citizens (customers above 60 years of age)
Current Accounts: Current Account is primarily meant for businessmen, firms, companies, and public enterprises etc. that undertake numerous banking transactions. Daily Current Accounts are cheque operated accounts which are meant neither for the purpose of earning interest nor for the purpose of savings but only for convenience of business. Hence they are non-interest bearing accounts. In a Current Account, a customer can deposit any amount of money any number of times. He can also withdraw any amount as many times as he wants, as long as he has funds to his credit. Generally, a higher minimum balance as compared to Savings Account is required to be maintained in Current account.
As per RBI directive banks are not allowed to pay any interest on the balances maintained in Current accounts. However, in case of death of the account holder his legal heirs are paid interest at the rates applicable to Savings bank deposit from the date of death till the date of settlement. Because of the large number of transactions in the account and volatile nature of balances maintained, banks usually levy certain service charges for operating a Current account.
