India Post offers its customers the facility of a 5-Year Recurring Deposit (RD) Account which is essentially a deposit scheme allowing customers to add to their savings by investing money which earns interest over a fixed period of time. An RD is usually opened for a fixed period of time and deposits must be made at predetermined intervals which may be monthly, quarterly, depending on the terms and conditions of the deposit scheme. Unlike a fixed deposit, an RD is not a one-time investment and may be closed before its maturity date. The India Post Recurring Deposit Account is an ideal investment option for first time investors or young professionals as it does not require customers to invest large sums of money towards installments but does earn you handsome interest at the end of the maturity period.
Post Office RD Eligibility
- Recurring Deposit Accounts can be opened by individuals as single or as joint accounts.
- An RD Account can be opened in the name of a minor. Minor individuals aged 10 years and above can open and operate their RD accounts.
Post Office RD Interest Rate
This RD scheme offers a Post Office RD Interest Rate of 5.8% per annum which is compounded quarterly.
|Interest Rate||5.8% p.a. (Compounded quarterly)|
|Minimum Deposit||Rs. 100 per month|
|Maximum Deposit||No Upper Limit (any amount in multiples of Rs.5)|
|Missed Deposit Penalty||Rs.1 for every Rs.100|
Post Office Recurring Deposit Tenure
A Recurring Deposit is an instrument which is used as a medium-term investment option. Most investors opt for it in order to meet foreseeable emergencies in the coming years. Currently, individuals who wish to open a Post Office RD need to ensure that their deposits are active for a minimum period of 5 years, i.e.Minimum Tenure of Post Office RD = 5 years
Individuals who wish to continue with their RD even after this period can do so, for there is a provision which permits an RD to be extended by 5 more years, taking the maximum tenure to 10 years. RDs which have been extended beyond 5 years will continue to earn the interest, which is compounded every quarter, as previously.
Quantum of Deposits
A Recurring Deposit provides individuals with an opportunity to save for the future by using the resources available to them. Unlike other deposits, the minimum deposit amount is kept low, ensuring that millions of rural and lower-middle-class Indians can afford it. The table below highlights the quantum of deposits permitted in an RD.
|Minimum Deposit||Rs.100 per month or any amount in multiples of Rs.10|
|Maximum Deposit||No upper limit|
Individuals can increase their deposit in multiples of Rs.5, ensuring that they invest whatever amount is feasible.
An individual opening a Post Office RD is expected to make a total of 60 deposits during the period, i.e. one deposit every month for 5 years. The first deposit should be made when the account is opened, with subsequent monthly deposits to be made before a particular date, depending on the date on which the account was opened.
Individuals who open an account between the 1st and 15th of a particular month are expected to make monthly deposits before the 15th of the next month. Accounts which were opened after the 15th of a month will require subsequent deposits to be made between the 16th and the last day of a particular month. Deposits can be made either by means of cash or a cheque.
Post Office Recurring Deposit (RD) Online Payment
Currently there is no way that post office RD online payment can be carried out from the account holder’s end except through ECS. You can use Electronic Clearing Service (ECS) to ensure that your deposits are paid. However, if you have an agent, he or she can conduct the post office recurring account online payment on your behalf. This is possible through the post office agent portal.
Premature Withdrawal of Recurring Deposit (RD) in Post Office
There could be instances where an individual is cash-strapped and in dire need of money. While it is not recommended to close an RD before its maturity, there is a provision for premature withdrawal of the amount in an RD. Listed below are the important points associated with the premature withdrawal of an RD.
- Premature withdrawal is permitted only after an account has been active for a minimum of 1 year.
- A minimum of 12 monthly deposits should have been made into the account before premature withdrawal is permitted.
- Only one withdrawal is permitted if the above conditions are satisfied. The quantum of such withdrawal should not be more than 50% of all deposits until said time.
- Withdrawal amount can be in multiples of Rs.5.
- Amount withdrawn should be repaid, either as a single lump sum amount or through EMIs.
- Interest should be paid by the individual on the amount withdrawn.
- Amount withdrawn needs to be repaid, with interest, before the RD matures.
Delayed RD Deposits – Fine and Penalties
There could be instances where an account holder is unable to deposit the monthly amount in his/her RD. As per applicable rules, a maximum of 4 such defaults are permitted, post which the account will become a discontinued account. Such discontinued accounts can be revived within a period of 2 months after the next (5th) default.
The rules also state that a default penalty of Rs.1 for every Rs.100 shall be charged. This fine needs to be paid in addition to the missed deposit amount in order for the account to be revived.
Post Office Recurring Deposit Rebate
In order to incentivize people into depositing money in advance, a Post Office RD provides rebates on advance deposits. These rebates might not sound a lot, but can help an individual with meagre resources save a considerable amount for other purposes. The table below highlights the rebate options provided with a Post Office RD.
Post Office Recurring Deposit Rebate Details
|Number of Advance Deposits Installments||Quantum of Rebate|
|6||Rs.10 for every Rs.100|
|12||Rs.40 for every Rs.100|
Frequently Asked Questions
Q.How much can I invest in a Post Office recurring deposit?
A.For opening a recurring deposit account with the Post Office, the minimum amount is Rs.100 per amount or any amount in multiples of Rs.10. There is no cap on the maximum amount that you can invest.
Q.Are Post office RDs tax-free?
A.Yes, they are tax free given that it has a tenure of 5 years.
Q.Is the facility of premature withdrawal available on Post Office recurring deposits?
A.The facility of premature withdrawal is available. However, premature withdrawal is allowed after 3 years from the date of opening the account
Q.Can an RD account be opened in the name of a minor at the post office?
A.Yes, an RD account in the name of a minor can be opened. The minor should be above 10 years of age.
Q.Does Post office offer any kind of rebate?
A.If you make advance deposit of at least 6 months, the post office shall offer you a rebate. Rebate will be paid for denomination of Rs.100.
Q.How is RD interest calculated?
A.Interest is compounded on a quarterly basis when it comes to recurring deposits.
Q.Which is the better option when it comes to opening an RD, in a bank or post office?
A.It is best to open an RD account where you can avail high interest rates.