Post Office Recurring Deposit of 5 years provides 7.4% interest rates and it is compounded every quarter. Such saving scheme gives the highest returns compared to bank RD rates. This scheme offers complete security of investments along with attractive returns. Due to their implementation through the post office, they can be run at the places which are geographically difficult to access. In this article, I would provide complete details about 5 Years Post Office Recurring Deposit Scheme. Who can invest in this Post Office Recurring Deposit scheme?
About Post Office Recurring Deposit Scheme
Post office gives the facility to its customers to open a 5 year recurring deposit account in order to add to their savings by investing money which earns interest over a fixed period of time. The deposits have to be made at predetermined intervals which may be monthly, quarterly depending on the terms and conditions of the deposit scheme. This recurring deposit scheme from India Post is an ideal investment for those who cannot invest lump sum money, but does earn handsome interest at the end of the maturity period.
Also Read: Latest Post Office Interest Rates in 2016
Features of the Post Office Recurring Deposit Account
The following are the key features of the India Post Recurring Deposit Account.
- The account is opened for 5 years and can be extended for another 5 years on year to year basis.
- The minimum amount by which the account can be opened is Rs. 10 per month. There is no upper limit to the maximum amount that can be deposited. The deposit needs to be in the multiples of Rs.5.
- Any number of accounts can be opened in any post office.
- Accounts can be transferred from one post office to another.
- Nomination facility is available at the time of opening and also after opening the account.
- The account can be opened by cash or cheque. In case of cheque, the date of deposit shall be the date of presentation of cheque.
- If you are depositing your installments through cheque, the date of credit of the cheque into government account shall be treated as date of deposit.
- The account can be opened in the name of the minor and a minor of 10 years and above age can open and operate the account.
- If the depositor is found default in any month, then he has to pay the default money first along with the default fees and then the current month deposit can be made.
- The default fee is charged @ 5 paisa for every Rs. 5 deposited. After 4 regular defaults, the account becomes discontinued. It can be revived in 2 months, but if the same is not revived within this period, no further deposit can be made.
- The rebate is also available if the depositor deposits at least 6 advance installments.
- Single account can be converted into a joint account and vice versa.
- After attaining majority, the minor has to apply for conversion of the account on his name.
- After one year of opening the account, one withdrawal up to 50% of the balance available in your account is allowed.
- If the account has been opened up to 15th of the calendar month, then his subsequent installments can be made up to the 15th day of the next month. And, if the account is opened in the second half of the calendar month, his subsequent last date to pay the installments would be the last working day of the month.
What are the interest rates on the Post Office RD Account?
With effect from 1st April 2016, the interest rate is 7.4% per annum with is compounded quarterly. The interest rates are revised by the government from time to time. As of now, Rs. 10 invested per month for a period of 5 years in recurring term will fetch Rs.726.97. Means if you invest Rs 1,000 per month, you can get Rs 72,600 after 5 years. If you invest Rs 10,000 per month, you can get Rs 7.26 Lakhs after 5 years.
Who is eligible to apply for this Post Office RD Scheme?
1) Recurring Deposit Accounts can be opened by individuals as single or as joint accounts.
2) An RD Account can be opened in the name of a minor. Minor individuals aged 10 years and above can open and operate their RD account.
Can we extend the PO RD Account after 5 years?
Yes. After completion of 5 years, one can extend Post office recurring deposit account for another 5 years on year to year basis.
Does Post office RD Scheme provides tax benefit u/s 80C?
Now you would get doubt about Post Office Recurring Deposit Tax Exemption u/s 80C. One should note that you are investing monthly for 5 years and you have not been investing your money for 5 years. Any investment invested for 5 years (start date to 5 year completion) only qualifies for a tax rebate u/s 80C. Hence Post office Recurring Deposit does not provide tax exemption u/s 80C.
Can we close Post Office RD before maturity?
Partial withdrawals available. One withdrawal up to 50% of the balance allowed after one year.
Is TDS applicable for PORD account?
Post Office does not deduct TDS for any of its schemes. However, you need to add this interest income every year or at maturity to your income under “income from other sources” and pay income tax based on your income tax slab. Means, PORD interest is not tax free.
Conclusion: Post Office Recurring Deposit scheme is a good scheme where one can save money every month and get handsome returns in 5 years. Since it offers the highest returns compared to bank RD’s, low to medium risk investors can invest in such schemes.
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Post Office Recurring Deposit Account of 5 years