Post Offices like banks offer RD (Recurring Deposits) and offer very competitive interest rates and is backed by Government of India. The post gives the details about the same.
Post Office RD Interest Rate
As with all other Small Saving Schemes like PPF, SCSS, Post Office RD rates are also declared every quarter. The Post Office RD Interest Rate for 2020 (Jan to Mar) are 7.2%. Interests are compounded quarterly under this scheme. There is no additional interest for senior citizens.
Also Read: 7 High Rated Companies Offering more than Bank Fixed Deposits
Post Office Recurring Deposit Scheme – Features
Who can open RD Account?
Any adult (more than 18 years of age) Indian can open Post Office RD Account. This can be either on one or joint names.
Accounts can also be opened by minor with more than 10 years of age along with an adult (parents or legal guardian).
NRIs are not eligible to open Post Office RDs.
Nomination can be done at the time of account opening or afterwards.
Post Office RDs still cannot be opened online.
If required the account can be transferred from one post office to other.
Post Office RD Investment Rules:
The minimum investment amount is Rs 10/month and there is no maximum investment limit (installment should be in multiples of 5).
The tenure for Post Office RD is 5 years which can be extended by another 5 years.
The money for initial deposit can be in cash, cheque or demand draft. However, in case of cheque or demand draft, the date of account opening is the day they get encashed.
There is no limit to the number of RD accounts you can create in post office. Essentially each RD created is like different account.
Premature withdrawal is allowed up to 50% of the balance after completion of 1 year.
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Penalty for missing Installment:
- A penalty of 5 paise per Rs 5 is levied for missed installment. For e.g. if a depositor missed has RD of Rs 500/month and misses 1 payment. He has to deposit installment of both current and previous month and a penalty of Rs 5 (500*0.05/5).
- In case the investor misses more than 4 installments, the account is closed.
- The depositor can also reopen the account within 2 months of discontinuation but after that period, the account is closed permanently and no deposit is allowed into the same account.
Incentive for Advance Deposits:
- The post office RD provides incentive if the installments are deposited in advance for more than 6 months.
- 6 advance but less than 11 – Rs.1 for every Rs.10
- More than 11 – Rs.4 for every Rs.10 deposited
Tax on Post Office RD Scheme:
The interest earned is subject to TDS @ 10% if the annual interest paid is more than Rs 40,000 [Budget 2019]
You can fill Form 15G/H in case you are eligible to avoid TDS
The interest received is fully taxable at applicable marginal income tax rates.
Effective April 1, 2018 Interest income up to Rs 50,000 is exempted from tax for Senior citizens u/s 80TTB [Budget 2018]
Post Office Recurring Deposit Interest Rate History:
Post Offices started offering recurring deposits from 1987 and the table below gives the interest rate since then for different tenures.
The highest interest ever offered was 13.5% for 5 years RD from 1st October 1991 to 1st September 1993.
After April 1, 2016 – Quarterly Interest Reset:
| Financial year | Apr – Jun | Jul – Sep | Oct – Dec | Jan – Mar |
| 2019 – 20 | 7.30% | 7.20% | 7.20% | 7.20% |
| 2018 – 19 | 6.90% | 6.90% | 7.30% | 7.30% |
| 2017 – 18 | 7.20% | 7.10% | 7.10% | 6.90% |
| 2016 – 17 | 7.40% | 7.40% | 7.30% | 7.30% |
Also Read: Best Tax Saving Investments u/s 80C
Before April 1, 2016:
| Financial Year | Time Period | Recurring Deposit |
| 2015 – 16 | 8.40% | |
| 2014 – 15 | 8.40% | |
| 2013 – 14 | 8.30% | |
| 2012 – 13 | 8.40% | |
| 2011 – 12 | 1 Dec 2011 to 31 March 2012 | 8.00% |
| 2011 – 12 | 1 March 2003 to 30 Nov 2011 | 7.50% |
| 2010 – 11 | 7.50% | |
| 2009 – 10 | 7.50% | |
| 2008 – 09 | 7.50% | |
| 2007 – 08 | 7.50% | |
| 2006 – 07 | 7.50% | |
| 2005 – 06 | 7.50% | |
| 2004 – 05 | 7.50% | |
| 2003 – 04 | 7.50% | |
| 2002 – 03 | 1 March 2003 to 30 Nov 2011 | 7.50% |
| 2002 – 03 | 1 March 2002 to 28 Feb 2003 | 8.50% |
| 2001 – 02 | 1 March 2002 to 28 Feb 2003 | 8.50% |
| 2001 – 02 | 1 March 2001 to 28 Feb 2002 | 9.00% |
| 2000 – 01 | 15 Jan 2000 to 28 Feb 2001 | 10.50% |
| 2000 – 01 | 1 Jan 1999 to 14 Jan 2000 | 11.50% |
| 1999 – 00 | 11.50% | |
| 1998 – 99 | 11.50% | |
| 1998 – 99 | 1 Jan 1999 to 14 Jan 2000 | 11.50% |
| 1998 – 99 | 2 Sep 1993 to 31 Dec 1998 | 12.50% |
| 1997 – 98 | 12.50% | |
| 1996 – 97 | 12.50% | |
| 1995 – 96 | 12.50% | |
| 1994 – 95 | 12.50% | |
| 1993 – 94 | 2 Sep 1993 to 31 Dec 1998 | 12.50% |
| 1993 – 94 | 16 Dec 1991 to 1 Sep 1993 | 13.50% |
| 1992 – 93 | 13.50% | |
| 1991 – 92 | 13.50% | |
| 1990 – 91 | 16 Dec 1991 to 1 Sep 1993 | 13.50% |
| 1990 – 91 | 1 Oct 1991 to 15 Dec 1991 | 13.50% |
| 1990 – 91 | 1 Apr 1991 to 30 Sep 1991 | 11.00% |
| 1989 – 90 | 11.00% | |
| 1988 – 89 | 11.00% | |
| 1987 – 88 | 11.00% |
Post Office Vs Bank RD:
| Post Office RD | Bank RD | |
| Interest Rate | Usually Higher. As of today offers 7.3% for 5 Year Tenure | Lower than Post Office RD. SBI offers 6.85% for 5 Years |
| Tenure | Fixed Tenures of 5 Years. can be extended by another 5 years | Flexible Tenure – can choose from 6 months to 10 Years |
| Safety | Extremely Safe as guaranteed by Government of India | Insured up to Rs 1 Lakh deposit only. Nationalized banks are safe followed by Large Private Banks. Stay cautious of cooperative banks |
| Ease of Investment | can be done only offline and so have to physically visit post office. Involves paperwork | Can be done online in most banks without much hassle |
| Extra Incentive | No special rates for Senior Citizens. | Banks usually offer 0.25% to 0.6% higher interest rate for Senior Citizens |
Also Read: Highest Interest Rate on Bank RDs (compared across 44 banks)
Should you Invest in Post Office RD?
The interest rates offered by Post Office RDs are generally higher than most Nationalized banks. However, the process of investment requires physical visit to the post office and paperwork. In case you are comfortable with the same it makes sense to invest in Post Office RDs.
PLEASE PROVIDE CALCULATOR WITH DATE OF INVESTMENT OPTION TO CALCULATE POST OFFICE RD INTEREST CALCULATION TO ADD INTEREST AMOUNT IN INCOME OF THE YEAR(ACCRUE INTEREST)
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