In banking terminology, the term recurring deposit refers to the periodic placement of a fixed sum of funds with a bank or financial institution into a special term account, with a specified tenure, generally between one and five years. At the end of the tenure, the funds are typically withdrawn by the depositor with accrued interest.
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Recurring Deposit is a special kind of Term Deposit offered by banks in India which help people with regular incomes to deposit a fixed amount every month into their Recurring Deposit account and earn interest at the rate applicable to Fixed Deposits.
Tax Deducted at Source ( TDS ) is applicable on Recurring deposits. If interest earned on recurring deposits exceeds Rs. 10,000 a year, TDS at the rate of 10 per cent would be deducted by the bank. Income tax is to be paid on interest earned from a Recurring Deposit at the rate of tax slab of the RD holder.