Difference between a recurring deposit and debt fund | Value Research Since you are planning to invest a small amount, you should ask yourself whether you are ready to take the trouble of investing in debt funds to earn a slightly higher return
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Difference between a recurring deposit and debt fund

Since you are planning to invest a small amount, you should ask yourself whether you are ready to take the trouble of investing in debt funds to earn a slightly higher return

What is the difference between debt fund and recurring deposit (RD). I am investing ₹3,000 every month in an RD. Which is better way to invest for a smaller duration for a year or two?
- Rahul Kumar

A recurring deposit and debt mutual funds are strictly not comparable. A recurring bank deposit helps you to save a small amount every month with your bank. The bank offers safety and assured interest on your deposit. A debt mutual fund helps you to invest in the debt market and earn a slightly better market-linked returns. It doesn't offer any assured returns and the returns would depend on the performance of the debt market.

However, since you are planning to invest a small amount, you should ask yourself whether you are ready to take the trouble of investing in debt funds to earn a slightly higher return. This is because the extra money you would earn wouldn't be so large, especially after paying taxes. If you are investing in debt funds for less than three years, there won't be any tax advantage. Short-term capital gains on debt funds held for less than three years are added to the income and taxed as per the income tax slab applicable to the investor. If investments are sold after three years, it may qualify for long-term capital gains tax of 20 per cent with indexation benefit.


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