What is a Post office RD scheme?

 

In a Post office RD scheme, individuals deposit a fixed amount of money at regular intervals (usually monthly) for a period of 60 months. The interest rates are fixed, and the maturity amount is calculated based on the principal and interest accrued.

​

Tenure – The tenure of the Post office RD scheme, is 5 years from the date of the first investment, which can be extended in a block of 5 years.

 

Deposit Limits – One can open a Post office RD scheme with a minimum investment of ₹ 100 per month and there is no maximum limit for monthly deposit. Investment can be made in instalments only. It is advisable to deposit the money before the 5th of every month to get interest for that particular month. If one invests more than ₹ 150,000 no interest is paid on that additional amount and no tax benefits are provided for the same. The additional amount is refunded back to the investors.

 

Effective Interest Rates: Post office RD is a debt-oriented investment. The interest rates are set by the government every quarter based on government yield. The current effective interest rate is 6.5% p.a. as of 1st July 2023. The interest rates are reviewed every quarter by the government and changed as per the current yield on government securities. New rates are applicable only to new accounts.

​

Tax Benefits: The investment in Post Office RD has no tax benefits. There are no deductions under section 80C and also the interest accumulated is taxable in the hands of investors. However, Senior Citizens can avail of tax benefits on interest income of ₹ 50,000 under section 80TTB. 

 

Loan: After 12 installments are deposited and the account is continued for 1 year not discontinued depositor may avail loan facility of up to 50% of the balance credit in the account. Loans can be repaid in one lump sum or in equal monthly instalments.  Interest on the loan will be applicable as a 2% + RD interest rate applicable to the RD account.

​

Nomination: The Post Office RD provides the provision for nomination as any other investments. Be sure to file the nomination at the time of account opening to avoid any hassles later on.

 

Premature Withdrawal: RD Account can be closed prematurely after 3 years from the date of account opening by submitting a prescribed application form at the concerned Post Office. PO Savings Account interest rate will be applicable if the account is closed prematurely even one day before maturity.

​

Maturity: The Post Office RD account will mature in 5 years (60 monthly deposits) from the date of opening.The Account can be extended for a further 5 years by giving an application at the concerned Post Office. The interest rate applicable during the extension will be the interest rate at which the account was originally opened.

​