India has a potentially large section of lower and middle-income groups of individuals who are on the lookout for good savings schemes. To cater to the demands of its working class, the Government of India has brought in various savings schemes as seen below operated by different departments.
Source : https://currentaffairs.adda247.com/goi-keeps-interest-rates-on-small-savings-schemes-unchanged-for-q1-april-june-2022/
One such popular and most sought out savings scheme is the Post Office Recurring Deposit scheme introduced by India Post across its post offices in the country. The major reason for its popularity is the attractive Post Office RD Interest Rate offered for this savings scheme, which gets compounded quarterly. As such, it is very beneficial even for first-time investors as they get to start their investment journey and also earn a decent return on their investment. The RD in Post Office helps to serve various financial goals of individuals including funding child education, marriage expenses and the like.
To help you better understand the popular Post Office RD Scheme, this handy guide will give you all the information relevant to the scheme.
- Post Office Recurring Deposit Scheme is a medium-term savings scheme having a minimum tenure of 5 years with quarterly compounding of interest.
- An account holder can extend the tenure of your Post Office Rd Scheme by blocks of 5 years.
- Account can be opened either as single holder or jointly with nomination facility·
- Minor above 10 years can operate account in own name.
- Minimum deposit amount is Rs. 100 with no limit on the maximum amount to be deposited.
- Post Office Recurring Deposit Scheme allows transfer facility across post offices.
- No TDS gets deducted on Post Office RD Interest.
What is Post Office RD Scheme?
The Post Office RD scheme is a 5-year guaranteed recurring deposit scheme which helps an investor to deposit some amount regularly (monthly/quarterly). After expiry of the tenure of 5 years, the scheme can be further extended to another 5 years. Investors also get to earn a decent Post Office RD Interest till the amount is kept deposited. Also, in order to make the scheme more attractive, rebate facility is allowed on advance deposits up to maximum of 6 instalments. You can easily transfer your RD account from one post office to another. Nomination facility is also available for the scheme, ensuring that on death of the account holder, the designated nominee gets the money without any hassles. The scheme thus provides various benefits to the risk averse investors to fulfil their investment goals.
- An individual can start investing through cash/cheque with minimum of Rs.100 or any amount with multiples of Rs.10
- There is no limit on the maximum amount which can be deposited in the scheme, making it a handy savings option
- 60 monthly deposits are to be made over a minimum period of 5 years
- If account opened up to 15th of a month, then subsequent deposit to be made up to 15th day of the following month
- If account is opened between 16th and last working day of a month, then subsequent deposit to be made up to last working day of month
What is Post Office RD Interest Rate?
The RD in Post Office offers a competitive fixed rate of interest. Currently, the RD Interest Rate in Post Office is at 5.80%. This makes the scheme a key risk free investment option for individuals who prefer low risk investments, and also for first-time investors. The Post Office RD Interest Rate gets compounded quarterly, so investors find this scheme very attractive. They get to build a strong corpus till the time of maturity, helping them build wealth and fulfil their financial goals over time.
On maturity, the investor gets the total of the principal sum and interest earned during the investment period. The below table will help an investor in evaluating how much they get to earn on maturity for minimum investment of Rs. 100 for minimum maturity period of 5 years and further extension for block of 5 years.
|Post Office Recurring Deposit – On Maturity|
|Term||Amount (Rs.)Minimum investment Rs. 100Interest Rate – 5.80%|
|At the end of 5th year||6,969.67|
|At the end of 6th year||8,620.98|
|At the end of 7th year||10,370.17|
|At the end of 8th year||12,223.03|
|At the end of 9th year||14,185.73|
|At the end of 10th year||16,264.76|
Source : https://www.indiapost.gov.in/Financial/pages/content/post-office-saving-schemes.aspx
How is Post Office RD Interest Rate Calculated?
The Post Office RD Interest Rate gets compounded quarterly. The interest formula is as stated below.
M = P X (1+R/N) ^ (NT)
M – Maturity Amount
P – Recurring Deposit
R – Interest Rate
N – Number of times the interest is compounded
T – Tenure
Did You Know?
Income earned from RD Interest Rate in Post Office is taxable under the Income Tax Act 1961, under Income from Other Sources
Who Can Open Post Office RD Scheme?
- An adult individual
- Joint Account up to 3 adults
- Guardian on behalf of a minor or person of unsound mind
- Minor above 10 years can open and operate own account
How to Open a Post Office Recurring Deposit?
To open a RD in Post Office anywhere in India, a person has to submit the below.
- Duly filled in Account Opening Form (AOF)
- KYC Form
- PAN CARD
- Aadhaar Card (If Aadhaar card not available, then
o Driving license
o Voter’s ID
o Job card provided by the MNREGA duly signed by officer from the State Government officer
o Letter from the National Population Register providing name and address particulars
- Birth Certificate or Proof of Birth in Case of Minor
Did You Know?
All Post Office Savings Schemes including Post Office Recurring Deposit offer guaranteed returns, being backed by the Government of India. Also, some post office investment schemes like National Savings Certificate, Public Provident Fund provide tax benefits up to a maximum of Rs.1.5 lakhs on investment.
Word to Remember
Post Office Savings Scheme – Post Office Saving Schemes are the various investment schemes offered by India’s Department of Posts, earning a higher rate of return as compared to fixed deposits.
Recurring Deposit (RD) – Recurring Deposit is a kind of term-deposit offered by banks or a post office. People can make regular deposits and earn good interest on their RD investment.
The Post Office RD Scheme with a minimum tenure of 5 years is a good savings option for individuals with regular income. The Post Office RD Interest Rate gets compounded quarterly, making investors earn a higher return on their investments.
So, get going and rush to your nearest post office to open the popular Post Office Recurring Deposit saving scheme
It refers to the RD offered by India Post as part of its Post Office Savings Scheme. The Post Office Recurring Deposit Interest rate is compounded on a quarterly basis as per the applicable rate declared.
Yes, if you have a savings account in a chosen post office, then you can open a Post Office RD account online through your internet banking account. If you do not have internet banking, then visit the nearest post office to activate it.
If the RD in Post Office is not deposited on any particular month, then it is deemed as default which attracts late payment fees. For every defaulted month (maximum 4 defaults allowed). the deposit can be credited in the next month with a revival fee of Rs. 100, denomination if Re. 1 for each month of default.
Yes, you can close your Post Office RD Scheme after 3 years. However, you will be eligible for only Post Office Savings Interest Rate.
The procedure for getting duplicate Post Office RD certificate issued is as below
The RD account holder needs to apply in the designated form for duplicate certificate (NC -29) for any lost, stolen, disfigured, torn or spoilt certificate
Along with the application, the investor has to furnish relevant details of their RD certificate
An indemnity bond (excluded for mutilated or defaced corticates) has to be provided in the prescribed form, having one or more sureties or a bank guarantee
The duplicate Post Office RD certificate gets issued as Passbook from the designated HO.