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

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 over the age of 18 years can open 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.
• Indian nationals of age 18 or above are deemed eligible to operate an RD account either singly or jointly.

Documents Required to Open a Post Office recurring Deposit Account

• A post office account-opening form
• Two passport-size photographs
• Address and identity proof, such as Aadhaar, passport, PAN card, Form 60 or 61 as per the Income Tax Act, 1961, driving license, voter’s identity card, or ration card
• Identity proof for verification when opening the account
• Selection of a nominee and the signature of a witness to complete the formalities

How to Open Post Office RD Account

Online Process:

To open a Post Office Recurring Deposit account online, you need to have an existing Post Office Savings Account and be registered for Indian Post Office Internet banking. Follow these steps:

1. Go to the Indian Post eBanking website.
2. Enter your registered “User ID” and captcha code, then click on “Log In.”
3. Under the General Services tab, click on the ‘Service Request’ option.
4. Follow the on-screen instructions to initiate the Post Office Recurring Deposit opening request.

Offline Process:

To open a Post Office Recurring Deposit account offline, follow these steps:

1. Download the Post Office RD application form online or collect one from the nearest post office.
2. Submit the completed form and the required documents along with a minimum deposit of Rs. 100 at the post office to open your Post Office RD account.

Interest Rate of Post Office RD

Post Office RD Interest Rates 2024

How to Calculate Post Office RD Interest?

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

For example - Mr. N invests Rs. 6,000 in his Post office RD at an annual interest rate of 7.2% for 60 months. The total amount at maturity will be:

A = P x (1 + R/N) ^ (Nt)
= Rs. 4,33,883

If you find the above calculation complicated, you can also use the post office RD calculator, which can make the calculation process easier and quicker.

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 minimal.

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 Post office 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.

If you want to calculate your tax exemption under recurring deposits easily and quickly, you can also consider using a post office RD calculator.

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 is 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.

In addition to this, these investments also come with tax-saving opportunities. If you want to maximize your tax savings, you can connect with our tax experts who can help you make the most of all potential deductions and exemptions and also assist you with ITR filing. Hire an Online CA now and File your ITR!