What If You Miss Pay the Recurring Deposit Due?

Rajat, being a self-dependent young boy, moved out of the house in the very early stage of his life. He started working for a private sector company in Delhi.

He was doing very well until a terrible incident happened and they detected his father with a terminal illness. That’s when Rajat decided to do everything in his power to save his father’s life and he was successful in doing that but he drained out all his savings.

After this, no matter how hard he tried, he couldn’t save any money and so he sought financial help. During this help, they introduced him to a term called investment and tax planning.

So, what are investment and tax planning?

Investment and tax planning are important attributes of the financial growth of an individual lately. It is analyzing and understanding the situation of an individual’s finances from the perspective of investment and tax.

With this planning, an investor can make sure that all the elements of finance like income, investment, size of purchase, and time of purchase function together with maximum tax efficiency.

An investor needs to ensure that they can increase the ability to offer towards their retirement along with reducing the tax liabilities.

Major objectives of investment and tax planning are:

• Economic growth and stability
• Reduction of tax liabilities
• Productive investment
• Minimization of legal actions

There are many investment and tax planning tools available with financial institutions and banks. Some of them are Public Provident Fund (PPF), NSC (National Savings Certificate), Life insurance, health insurance, residential housing property, an equity-linked savings scheme, fixed deposits, and so on.

There is one more tool that is used by people who want to deposit a certain amount of money every month and that is a recurring deposit or (RD).

What is a Recurring deposit or (RD)?

A recurring deposit is an investment scheme that found its popularity because of the benefits that it provides. In this scheme, investors deposit a fixed amount every month in their account over a pre-planned period as due. There is no minimum or maximum amount requirement with recurring deposit accounts.

You can start with as low as Rs 500 and continue with the same. This investment scheme allows investors to make regular deposits and earn a decent amount of return on investment and therefore is a flexible and easy investment scheme.

Every financial institute or bank provides with recurring deposit interest rate calculator via which an investor can calculate their investment interest. Thich helps the investor know the accurate amount and removes the trouble of figuring out the returns manually.

Interest is a quarterly component and involves various variables, therefore, the RD calculator makes it easy, and time-saving for the investors and provides the exact amount of investment which helps in better future planning.

The only questionable issue with RD Calculator is investors must do their TDS deduction manually, and that is because of the variety in TDS Deduction implementation among the different banks in India.

What happens if you miss the RD Installment?

If the investor misses the RD installment for a month, the financial institute or the bank may end up charging a penalty fee, which may again vary from bank to bank. If in case, the RD installment is not being credited for consecutive 3-to-4-months, it will deactivate the RD account until all the dues are unburdened.

Regardless, non-payment of monthly dues under Recurring deposit schemes varies from bank to bank and hence an investor must know all the terms and conditions before taking up the RD scheme. This solves this issue also, and that is to deposit extra money with an RD account with your bank or in the post office for a pre-defined term every month because once a recurring deposit starts one cannot alter the RD booked installment amount or the term.

Conclusion

A recurring deposit is a kind of term deposit that helps people with regular income to deposit a fixed amount of money every month. They also referred to this amount as RD booked installment. This scheme allows investors an opportunity to save monthly a fixed sum of money over a fixed period and earn a fixed return on investment as well.

The period for recurring deposits varies from six months to 10 years. This is one of the safest and most efficient forms of a saving scheme for someone who plans to save a fixed amount monthly.