Post office RD interest rate and recurring deposit rules

Current post office rd interest rate and how it is fixed

Each RD rate of interest in post office accounts is set by the Finance Ministry. It is revised, or left as it is, at each quarterly review alongside other small savings rates. The postal RD interest rate is the same at a village branch and a city head office. Your account keeps its opening rate for all five years, and also for the five year extension if you choose one.

Interest is added to the balance four times a year. Each deposit earns only from its own month onward. The first deposit earns for the full five years and the last one for just a month, which is why the maturity amount is lower than you might expect from the headline rate.

Post office RD scheme chart: what you get back

These RD interest rates post office figures follow the same quarterly compounding India Post uses in its own published example. For any other amount, use the RD post office calculator.

Opening an RD scheme in post office

Accounts can be held by one adult, by two or three adults together, by a parent or guardian for a child, or by a child of 10 or above. There is no cap on how many RD accounts one person keeps.

Due dates, late fees and revival

If the account was opened on any date up to the 15th, each later deposit is due by the 15th. If it was opened on the 16th or later, the due date is the month's final working day. For each month you miss, the post office charges 1 rupee on each 100 rupees of your instalment.

Four defaults one after another make the account discontinued. You can revive it within two months by paying all missed deposits with the fees. If not revived, it stays closed to new deposits, and you get the balance with interest at maturity.

Advance deposits, loan and early closure

You can pay ahead, up to five years in advance. Paying six or more months ahead earns a small rebate. India Post lists 10 rupees per 100 rupees of monthly amount for six months ahead and 40 rupees for twelve months ahead.

After 12 deposits and one year without a break, the post office will lend against the account, up to half of its balance. Interest on the loan is charged at 2 percentage points above the RD rate, and you can repay in one go or in equal monthly sums.

The account can be closed early after three years from opening. In that case you get interest at the savings account rate of 4% instead of the RD rate, so the payout is clearly lower.

Maturity, extension and tax

After 60 deposits the account matures. At that point, submit the passbook with a closure form, or opt to extend for another five years at the same rate you opened with. During the extension you may keep depositing or simply let the balance earn.

RD gives no tax deduction. RD interest is part of your taxable income. TDS applies only when the interest passes the threshold. A no deduction declaration (15G or 15H) helps if your income is under the limit.

Post office RD compared with a bank RD and a time deposit

Bank RDs follow the same idea, though every bank fixes its own rate and late fee; look at the bank's latest rate card. A post office RD pays one rate across India. If you already have a lump sum, a post office time deposit may suit better. For general background on recurring deposits, see what is RD. Many people also feed their MIS payout into an RD.