If you are considering saving a small amount in your nearby area, then Post Office Recurring Deposit(RD) schemes may be the best option for you. Here you may know the all details regarding Post Office Recurring Deposit(RD) before the investing journey.
The ease and accessibility of depositing monthly installments is the primary advantage of investing in Post Office Recurring Deposits (RDs). Now post office has also made the facility to open and deposit the Post Office Recurring Deposit(RD) online easily.
Here are the main features of Post Office Recurring Deposit(RD):-
Interest on Post Office Recurring Deposit(RD)
- Rate: 6.7% per annum (compounded quarterly)
- Effective from: April 1, 2024 onwards ( Subject to change every quarter)
Minimum and Maximum Deposit
- Minimum monthly deposit: ₹100 or multiples of ₹10
- No maximum limit
Who Can Open an Account
- Single adult
- Up to 3 adults in a joint account (Joint A or Joint B)
- Guardian on behalf of a minor
- Minor above 10 years in their name
Number of Accounts
- You can open any number of RD accounts.
Deposits
- Deposits can be made by cash or cheque (the deposit date is the clearance date for cheques).
- Subsequent deposits depend on when the account is opened:
- Opened by the 15th of a month: deposit by the 15th of each following month.
- Opened between the 16th and last working day: deposit by the last working day of each following month.
- PORD may be opened online through DOP net banking
- PORD monthly installments can also be deposited online
Defaults
- A default fee of ₹1 per ₹100 willbe charged for each missed monthly deposit.
- To make a current month deposit, any defaulted deposits and fees must be paid first.
- After 4 defaults, the account becomes discontinued. You can revive it within 2 months, but further deposits are blocked if not revived.
- For less than 4 defaults, you can extend the maturity by the number of default months and deposit the missed installments during the extension period.
Advance Deposits
- You can make advance deposits up to 5 years in an active account.
- Rebates are offered for advance deposits of at least 6 installments (including the deposit month):
- ₹10 for 6 months
- ₹40 for 12 months
- Advance deposits can be made at account opening or anytime thereafter.
Loan
- Available after 12 installments and 1 year of continued account activity.
- Loan amount: Up to 50% of the balance credit in the account.
- Repayment: Lump sum or equal monthly installments.
- Loan interest rate: 2% + RD account interest rate.
- Interest is calculated from withdrawal to repayment date.
- Loan and interest are deducted from maturity value if not repaid by maturity.
- A loan application form with a passbook is required at the Post Office.
Premature Closure
- Allowed after 3 years from account opening by submitting an application form.
- Post Office Savings Account interest rate applies if closed even one day before maturity.
- Premature closure is not allowed for the period of any advance deposits made.
Maturity
- RD Maturity Term is 5 years i.e 60 monthly deposits from the date of opening.
- Extendable for another 5 years by application at the Post Office. The original opening interest rate applies during the extension.
- Extended accounts can be closed anytime during the extension period.
- Completed years earn RD interest rate.
- Periods less than a year earn Post Office Savings Account interest rate.
- Post Office RD Account can be continue up to 5 years from maturity without further deposits.
Repayment on Death of Account Holder
- The nominee/claimant can submit a claim form at the Post Office to receive the eligible balance.
- Nominees/legal heirs can continue the RD account until maturity by submitting an application.
Tax Implications:
- Interest earned on RDs is taxable as per your income tax slab.
- TDS (Tax Deducted at Source) may be deducted on interest income exceeding a certain threshold (subject to change in tax regulations).
Alternatives to RDs:
- Fixed Deposits (FDs): Offer higher interest rates typically but with lower flexibility for deposits and withdrawals.
- Mutual Funds (MFs): Offer potentially higher returns but with inherent market risks.
Choosing the Right RD Account:
- Consider your investment goals, risk tolerance, and desired liquidity.
- Post Office Recurring Deposit(RD) is 100% secure compared to bank RD.
- Especially in unbanked areas of India, RDs are a safe and low-risk savings option that may be used to develop a corpus gradually with little steps for significant savings.
- They are ideal for inculcating a regular savings habit.
Repayment of Full Maturity Value on Death of Account Holder (Protected Savings Scheme) – Explained in Detail
.A special benefit is available for certain Recurring Deposit (RD) accounts in case of the account holder’s death. It’s called the Post Office Recurring Deposit(RD) Protected Savings Scheme.
Who is Eligible?
- This benefit applies only to single accounts or joint accounts where all account holders have passed away.
- The account must be active (not discontinued) during the maturity period or its extension.
- The account must have been open for at least two years from the opening date to the date of death.
- The account holder(s) must have been between 18 and 55 years old when opening the account. Proof of age may be required if not declared earlier.
- All deposits in the first 24 months must have been made without default (late payments).
- Any defaults after 24 months with revival fees will be deducted from the benefit amount.
- No loans can be taken from the account during the first 24 months.
- If a loan was taken after 24 months, the outstanding loan amount and interest will be deducted from the benefit amount.
Maximum Benefit Amount:
- The maximum benefit is the maturity value of a ₹100 denomination RD account, even if the original account had a higher denomination.
Number of Accounts Eligible:
- If you have multiple accounts under ₹100, you can receive the benefit for all accounts specified by you, up to a maximum of ₹100 maturity value.
- If you have multiple accounts exceeding ₹100, you can only choose one account for the benefit, again with a maximum of ₹100 maturity value.
- You can change the chosen account by contacting the account office.
- If no account is chosen, the benefit will be applied to earlier qualifying accounts.
- With different nominations for multiple accounts, the benefit goes to the nominees of earlier qualifying accounts.
Claiming the Benefit:
- The legal heir or nominee must apply to the Accounts Office within one year of the account holder’s death.
- A death certificate and a declaration stating no prior benefit claimed for the deceased are required.
- Any remaining advance deposits will be refunded along with the benefit amount.
- For accounts exceeding ₹100, a proportionate maturity value is calculated based on deposited installments.
- If this amount exceeds the ₹100 maturity value, no benefit is provided.
- If it’s less than ₹100, the full ₹100 maturity value benefit is given.
- If you have multiple accounts under ₹100 that together exceed ₹100, the benefit applies only if the combined proportionate maturity value is less than the ₹100 maturity value.
- This is a special benefit and may not be available with all RD accounts. Check with your post office for details.
- Carefully review the eligibility criteria and claim process to ensure you can receive this benefit.
Post Office RD vs. Bank RD: A Detailed Guide
Both Post Office RDs (Recurring Deposits) and Bank RDs are popular saving instruments in India that offer guaranteed returns and a way to inculcate regular savings habits.
Interest Rates:
- Post Office RD: Currently offers 6.7% per annum (compounded quarterly) as of January 1, 2024. Rates are revised quarterly by the government.
- Bank RD: Interest rates vary depending on the bank, chosen tenure, and prevailing market conditions. Generally, private banks may offer slightly higher rates than public sector banks. Rates are typically fixed for the chosen tenure.
Tenure (Term):
- Post Office RD: Fixed at 5 years.
- Bank RD: Offers flexibility with tenures ranging from a few months to 10 years.
Minimum Investment:
- Post Office RD: Minimum ₹100 per month, with subsequent deposits in multiples of ₹10. No upper limit.
- Bank RD: Minimum investment varies depending on the bank, typically starting from ₹100 or ₹500.
Maximum Deposit:
- Post Office RD: No maximum limit.
- Bank RD: Usually no upper limit, but some banks may have restrictions.
Liquidity:
- Post Office RD: Partial withdrawal allowed only after 1 year, with a penalty for premature closure. You can withdraw up to 50% of the balance remaining after 1 year.
- Bank RD: Banks generally offer more liquidity options. You may be able to get loans or overdrafts against your RD deposit (up to a certain percentage). Some banks allow premature closure with a penalty.
Safety and Security:
- Post Office RD: Backed by the Government of India, considered highly safe.
- Bank RD: Deposits up to ₹5 lakh per account holder are insured by Deposit Insurance and Credit Guarantee Corporation (DICGC) in case of bank failure.
Other Features:
- Post Office RD: Advance deposits (up to 5 years) with rebate for lump sum deposits. RD Account can be extended for another 5 years after maturity with or without monthly deposit.
- Bank RD: May offer features like auto-renewal, online management, and higher interest rates for senior citizens.
Choosing Between Post Office RD and Bank RD:
- Go for Post Office RD if: You prioritize safety, prefer a fixed 5-year term, and don’t need immediate access to funds.
- Go for Bank RD if: You need flexibility in tenure or require liquidity options like loans or overdrafts. You might also benefit from potentially higher interest rates offered by some banks.