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Post Office RD: Recurring Deposit Interest Rates, Rebate & Return

Updated on: 15 Feb, 2024 04:45 PM

Remember the friendly neighborhood post office you visited as a kid? Well, it's time to revisit, because it's no longer just about stamps and postcards! Your local post office now offers financial opportunities to help you grow your hard-earned cash.

The Indian Post provides an investment facility wherein customers can deposit some amount of money as savings from their income and earn a good amount of interest upon maturity. The tenure for post office RD is 5 years.
The interest under the post office RD is compounded quarterly, which further depends on the requirements of the deposit scheme that is being chosen by the customer. In a Recurring Deposit, the customer must make fixed deposits. Thus, this Recurring Deposit scheme offered by the India Post seems to be a perfect saving option for individuals who are investing for the first time, and for young educated graduates who can invest in installments.

Features Of 5 Year Post Office Recurring Deposit Scheme

  • To open a Recurring Deposit account, a minimum amount of Rs.100/- per month or any such amount in multiples of Rs.10 can be deposited by a customer. Also, the customers can invest as much as they want per month in the Recurring Deposit account. Tenure of investment Between 6 months and 10 years.
  • The Recurring Deposit account is transferable from one post office to the other.
  • There are no limits to the number of Recurring Deposit accounts that a customer can open. These Recurring Deposits can be opened in any post office.
  • The customer can open the Recurring Deposit account by either paying in cash or cheque. The date of the cheque will be considered as the date of opening of the account if the payment is made by cheque.
  • It is possible for the customers to get the nomination facility not only while he is opening the account but also later on.
  • After opening the account, the customer can withdraw 50% of the balance of the account after completion of one year. The facility of premature withdrawal of the RD account is allowed for the account holders in case of an emergency or for urgent expenses.
  • Any customer who pays six months or more deposits at a time can get the rebate.
  • Customers can change their single account into a joint account and vice versa.
  • In case, if the minor account holder becomes a major, he has the right to change the account in his name.
  • The customer is supposed to pay a default fee at the rate of ₹ 1 for every ₹ 100/- of the deposit amount for any delay in paying the deposit amount. Also, in case the customer fails to pay for four consecutive times, then the account can be discontinued, and after that, the account can be reused only after two months. However, this time period varies from bank to bank so need to check with the bank/financial institution at the time of opening an account. The customer will not be able to make any further deposits if the customer does not reuse the account in two months.
  • The next due date for depositing the payments, in case if the Recurring Deposit account is opened on the 15th of the month is the 15th of the following month. However, in case the account was opened on the 16th of the month or till the last date of the month, then in such cases the consecutive deposit will be made on the next month's last date by the customer.

Eligibility to Invest in Post Office Recurring Deposit

  • Resident Indians can open the Recurring Deposit Accounts either in the form of a single account or as joint accounts.
  • The Recurring Deposit Account is possible in the name of a minor. Minors who are aged 10 and above can open, and operate their account if they provide proof of name. Any minor below or equal to 10 years of age under the guardianship of a natural or legal guardian can open an RD account.

Interest Rate of Post Office RD

Post Office RD Interest Rates 2023

Tenure RD Rates for General Citizens RD Rates for Senior Citizens
5 years 6.70% 6.70%
The interest is calculated quarterly but is payable on an annual basis. The interest rates for Q2 FY 2023-24 i.e. from 1 July, 2023 to 30 September, 2023 are as follows:
Period Rate of Interest
1 year account 6.9%
2 year account 7%
3 year account 7%
5 year account 7.5%

How to Calculate Post Office RD Returns?

The interest amount on recurring deposits is usually compounded on a quarterly basis:

The following RD Calculator Formula is used by banks to calculate how much the interest component on a recurring deposit will be at maturity:

M =R[(1+i) n - 1]/1-(1+i) (-1/3)
Note:
M = Maturity value of the RD
R = Monthly installment credited in the RD
n = Number of quarters (in the total tenure)
i = Rate of Interest / 400


Post Office Recurring Deposit Online Payment

Indian Post has introduced the India Post Payments Bank (IPPB), which will help you to make the monthly deposit payments of the Recurring Deposit account online. The customer needs to visit the post office once to open the Recurring Deposit account, and after that, the customer can manage his Recurring Deposit account using the IPPB app on their mobile. The following are the steps for making the monthly deposit payments in the post office RD account through IPPB:

  • Step 1: Transfer money from your bank account to the IPPB account
  • Step 2: Go to DOP Products and choose Recurring Deposit.
  • Step 3: Put your Recurring Deposit account number and then put the DOP customer ID.
  • Step 4: Now choose the installment amount and the duration.
  • Step 5: IPPB will send a notification to you for the successful payment of your monthly installment in your Recurring Deposit account, which was done using the IPPB mobile application.

Loan on The Post Office Recurring Deposit Account

Although it is not at all advised to close the Recurring Deposit account before its maturity, because of any emergency if this needs to be done, there are a few provisions which have been discussed below:-

  • To withdraw the deposit amount from the Recurring Deposit account, it is necessary that the account is active for a minimum period of one year.
  • A minimum of twelve monthly deposits are made into the Recurring Deposit account for a withdrawal before the maturity.
  • Usually, only one withdrawal is allowed if all the conditions are satisfied. However, the amount of withdrawal amount should not be more than 50% of all the deposits until the said date. Mid-term or partial withdrawal is not allowed.
  • The customer needs to repay either in equal installments or in a single lot for any amount that is withdrawn by the customer.
  • The loan interest will be calculated at a rate of 2% in addition to the interest rate applied to the RD (Recurring Deposit) account.
  • Interest will be computed from the withdrawal date until the repayment date.
  • The repayment of both the amount withdrawn and the interest on it has to be repaid before the maturity of the Recurring Deposit account.
  • In case the loan is not repaid till maturity, the loan plus interest will be deducted from the maturity value of the RD account.

Post Office Recurring Deposit Tenure

At present, customers can open a Post Office Recurring Deposit account, and they need to make sure that their deposits are active for a minimum period of 5 years.
Customers who opt to continue with their Recurring Deposit account even after five years have ended can further extend their Recurring Deposit account for another five years. Thus, the entire tenure, in such a case, will be ten years. Also, one of the other good things is that the interest that is earned during the five-year tenure will still be compounded quarterly.


Amount to be deposited into Post Office RD scheme

The Post Office Recurring Deposit account gives customers a chance to save for their future. The minimum amount of deposit to be made in the Post Office Recurring Deposit account is tiniest

The minimum deposit amount that a customer can make every month is Rs.100/-. Also, there is no limitation on the maximum amount of deposit that a customer has to make every month. Also, the customer can increase their deposit amount in multiples of Rs.10.


Deposit Dates For Post Office Recurring Deposit Account

The customer who opens a Post Office Recurring Deposit account will have to make 60 deposits in five years. i.e., each month for five years, he will have to deposit the amount. The first deposit is to be made while opening the Recurring Deposit account with the post office. The deposits to be made after that will depend on the day when the Recurring Deposit account was opened.

Any customer who opens the Recurring Deposit account from the 1st to the 15th of the month will have to make all the other deposits on the 15th of the next month. Also, the customer who opens the Recurring Deposit account between the 15th and the last day of the month will have to make all the other deposits on the last day of the next month. The customer can pay these deposits to the Recurring Deposit account through cash, Demand Draft, Pay Order, or Cheque.


Delayed post office RD Deposits – Fine And Penalties

The Consequences of Delayed Post Office RD Deposits are as follows:

  • A monthly deposit is required for the RD account to keep it active. If the deposit is not made by the due date, a fee of ₹ 1 per ₹ 100 denomination (or a proportionate amount for other denominations) is charged for each month of delay.
  • The delayed deposit and the fee must be paid before the current month’s deposit can be made.
  • If there are four consecutive delays, the account is discontinued and can only be revived within two months from the fourth delay by paying all the dues.
  • If the account is not revived within this period, no more deposits can be made, and the account can only be closed at maturity with interest.
  • If there are less than four delays, the account holder can choose to extend the maturity period by the same number of months as the delays and make up for the missed deposits during the extended period.

What happens to Post Office RD account if account holder passes away?

Life can be unpredictable, and it's important to have your finances in order. If the account holder of a Post Office RD sadly passes away, here's what happens:

  • The eligible balance of the RD account can be claimed by the designated nominee or, in their absence, by the legal heir(s).
  • Submit a claim form at the concerned Post Office where the account was opened.

What are the Tax Implications of a Post Office RD Account?

A Recurring Deposit (RD) account in the post office is eligible for tax exemptions under Section 80C. Individuals can claim tax exemptions of up to Rs. 1.5 lakh annually under this section.

However, the interest earned through the post office RD scheme is subject to taxation. Individuals are required to pay tax based on their income tax slab. Additionally, if the interest earned exceeds Rs. 10,000, it becomes subject to TDS (Tax Deducted at Source) deduction. Individuals with an active PAN would incur a TDS deduction at a rate of 10%, while those without a PAN would be subject to the same deduction at a higher rate of 20%.

If you have a Post Office RD account that is maturing soon or has already matured, you may be wondering how it will affect your taxes. Our Tax Advisory Service can help you understand the tax rules on RD interest income and how to save tax efficiently.


Post Office Recurring Deposit Rebate

Advance Deposits:

  • You can make advance deposits for up to 5 years in an RD account that is not discontinued.
  • Receive a rebate of Rs. 10 for a 6-month advance deposit of at least 6 installments (including the month of deposit) with a denomination of Rs. 100. If you opt for a 12-month advance deposit with the same denomination, you will be eligible for a rebate of Rs. 40.
  • You can make the advance deposit either at the time of opening the account or later.

Thus, this five-year Post Office Recurring Deposit scheme introduced by the Indian Post is undoubtedly going to be very popular among all types of investors because it can inculcate a habit of saving money every month, and it also provides a good interest on the deposits made. So, investors who are looking for a safe and high rate of return on their investments made by them should surely look for the five-year Post Office Recurring Deposit scheme.


Frequently Asked Questions

Q- Can I Withdraw my RD before maturity in post office?

Yes, but there are certain considerations to be fulfilled:

  • To withdraw the deposit amount from the Recurring Deposit account, it is necessary that the account is active for a minimum period of one year.
  • A minimum of twelve monthly deposits are made into the Recurring Deposit account for a withdrawal before the maturity.
  • Usually, only one withdrawal is allowed if all the conditions are satisfied. However, the amount of withdrawal amount should not be more than 50% of all the deposits until the said date.
  • The withdrawal from the Recurring Deposit account should be in multiples of Rs.5.
  • The customer needs to repay either in equal installments or in a single lot for any amount that is withdrawn by the customer.
  • The interest has to be paid by the Recurring Deposit account holder on the amount that he has removed from the Recurring Deposit account.
  • The repayment of both the amount withdrawn and the interest on it has to be repaid before the maturity of the Recurring Deposit account.
  • The investment in Post Office RDs is not eligible for tax savings under Section 80C of the Income Tax Act, 1961.

Q- What is the interest rate on Post office RD?

The current rate of interest on post office RD is 5.80% p.a.


Q- What is the post office Time deposit?

The Post-Office Term Deposit (POTD) Scheme is an investment savings account scheme offered by the India Post (Department of Posts). This scheme is meant for those depositors who want to deposit a lump sum of money for a fixed five-year tax saving fixed deposit.


Q- What is RD in the post office?

One of its most well-known banking services is the post office recurring deposit scheme. The 5-year Post Office Recurring Deposit (PORD) scheme allows you to save on a regular monthly basis for 5 years, i.e., 60 monthly installments. These deposits earn interest as per the applicable rate compounded on a quarterly basis.


Q- What is a recurring deposit account?

Banks offer the facility of maintaining a recurring deposit to allow people to deposit a fixed amount every month and earn interest rates applicable to fixed deposits.


Q- What is the senior citizen saving scheme?

Senior Citizen Savings Scheme, 2004 (SCSS) is eligible for deduction under section 80C. An SCSS account can be opened by a senior citizen of India. If an individual has opted for a voluntary retirement scheme or retired between the ages of 55 and 60 years, can invest in an SCSS account within one month of retirement. The defense personnel can opt for this scheme if retire at the age of 50 years or thereafter. Any other individual can opt for this scheme above the age of 60 years. An SCSS account is a safe method of parking your savings, earning interest thereon, and availing tax benefits.


Q- What is the interest rate of the post office?

Instruments Rate of Interest (w.e.f 01.07.2023 to 30.09.2023) Compounding Frequency
Post Office Savings Account 4.00% Annually
1-Year Time Deposit 6.9% (Annual Interest ₹708 for ₹10,000/-) Quarterly
2-Year Time Deposit 7.0% (Annual Interest ₹719 for ₹10,000/-) Quarterly
3-Year Time Deposit 7.0% (Annual Interest ₹719 for ₹10,000/-) Quarterly
5-Year Time Deposit 7.5% (Annual Interest ₹771 for ₹10,000/-) Quarterly
5 Year Recurring Deposit Scheme 6.50% Quarterly
Senior Citizen Savings Scheme 8.2% (Quarterly Interest ₹205 for ₹10,000/-) Quarterly and Paid
Monthly Income Account 7.4% (Monthly Interest ₹62 for ₹10,000/-) Monthly and Paid
National Savings Certificate (VIII Issue) 7.7% (Maturity Value ₹14,490 for ₹10,000/-) Annually
Public Provident Fund Scheme 7.10% Annually
Kisan Vikas Patra 7.5% (will mature in 115 months) Annually
Mahila Samman Savings Certificate 7.5% (Maturity Value ₹11,602 for ₹10,000/-) Quarterly
Sukanya Samriddhi Account Scheme 8.00% Annually

Q- What is postal banking?

Postal Banking refers to the facility of financial and banking services provided through the postal system.


Q- Which bank gives maximum interest on a savings account?

The highest savings account interest rate is being offered by Digibank by Jana Small Finance bank at 7% for a balance between Rs 1 to 5 lakhs


Q- Which is the best post office scheme?

The post office schemes that are eligible for deduction under section 80C are a 5-year time deposit, public provident fund, Sukanya Samriddhi Yojana, national savings certificate, and senior citizen savings scheme (SCSS). Out of them, the highest rate of interest is offered by SCSS at 8.2%. However, only senior citizens are eligible to invest in SCSS. Hence, for individuals who are not senior citizens, the highest rate of interest is offered by Sukanya Samriddhi Yojana. Hence, the best post office scheme for senior citizens is the Senior Citizens Savings Scheme, and for other individuals, it is Sukanya Samriddhi Yojana.


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CA Abhishek Soni
CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.