Post Office Recurring Deposit – A Handy Guide

India is home to a substantially large number of lower and middle-income groups of people. India Post, governed by the Ministry of Communication & Technology took an initiative that would go on to become one of the most popular and sought after savings schemes – Post Office Recurring Deposit. Not only does this scheme helps breadwinners to save for goals such as education of their child, purchase of two-wheeler, but has also assisted homemakers and other non-earning members of the household in saving small amounts of money.

Let us take a closer look at this incredibly successful savings scheme and understand some of its inherent nuances.

Post Office Recurring Deposit

It is essentially a Savings Scheme which enables individuals to build capital over a stipulated time period, by setting aside a pre-decided amount of money every month. This government-backed scheme allows an individual to start investing from as little as Rs. 100 a month, for a minimum period of 5 years. The savings under this scheme generate a return in the form of interest earned on the amount saved.

How to Open a Post Office RD account?

It is extremely easy to open a Post Office Recurring Deposit Account. All you need to do is visit your nearest Post Office and fill the relevant application form. That being done, you will be required to submit a pay-in slip along with the initial deposit. You can make this deposit in the form of cash or cheque.

Here, you must note that the Application Form for opening an RD Account is different for Senior Citizens. The post office will avail the same on request.

Post Office Recurring Deposit Interest Rate

One can easily open a Post Office Recurring Deposit with a minimum of Rs. 10, with no upper limit. The Savings Scheme entitles the account holder to the considerably high RD Interest Rates of 7.1% on the amount, wherein the interest is compounded quarterly to ensure enhanced benefits in the form of greater returns on investments.

Post Office Recurring Deposit Withdrawal

In case it is required, account holders are entitled to withdraw up to 50% of the available balance in their Post Office Recurring Deposit, after 1 year of opening the account. This, however, isn’t applicable for minors, as they can only withdraw the money once they mature, and convert their accounts into regular RD accounts.

Post Office Recurring Deposit Features

Here are some of the salient features of Post Office Recurring Deposit Account –

• The Post Office RD is a medium-term savings scheme, with a minimum tenure of 5 years,

• In case of an account holder wishes, they can extend the tenure of the account in blocks of 5 years

• The Recurring Deposit Account offers a wide array of benefits including transfer facility from one post office to another, at any point in time, in a rather seamless manner.

• The facility of a Joint Recurring Deposit is also available wherein two adults can hold the account

• Minors of age 10 and above are also eligible to open and manage their own RD accounts. In this case, however, when the minors turn 18, they are required to file an application for conversion (after maturity), in order to be able to withdraw the amount.

• The parents or guardians of a minor below 10 years of age, can also open and operate a Post Office Recurring Deposit Account. In this case, however, when the minors turn into adults, they are required to file an application for conversion (after maturity), in order to be able to withdraw the amount.

• Adults can also avail the facility to open a joint account with a nomination facility.

• One can easily convert their Joint Post Office Recurring Deposit Account to a Single Account, and vice versa.

• In case the account holder passes away (under certain specific conditions), the nominee will be entitled to receive the maturity amount.

• There is no deduction of TDS on Post office RD Interest Rates unlike that on the interest earned on Bank Recurring Deposits.

• Income generated in the form of the interest earned from a Post Office RD Account is taxable under the Income Tax Act, under the ‘Income from Other Sources’ head.

A recurring deposit is a great step for any individual who wishes to nurture the habit of investing on a regular basis. Since a Post Office RD allows both minors and adults to open and manage their accounts, it is no doubt that this savings scheme helps instil the promising practice of savings, while ensuring a sizeable return on the saved money. While opening and operating the Post Office RD Account is simple and hassle-free, it may not be the ideal option for those who are looking forward to short-term savings schemes. For such people, a Bank RD may prove to be helpful, and the tenure starts from 6 months onwards, as opposed to Post Office RD, wherein the maximum tenure is that of 5 years!

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