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The Government of India announced the National Saving Recurring Deposit Scheme under notification number G.S.R. 918(E). The Government of India regulates and manages the Post Office Recurring Deposit. The intent of this scheme is to encourage and the habit of small savings among the investors so that they secure their future needs. With the Post Office RD scheme, an investor can invest as low as Rs 100 in a low-risk investment option. These 2 factors along with the interest rate make this scheme attractive to investors.

Post Office RD Details

## Features of Post Office Recurring Deposit Scheme

1. The interest rate on post office RD is 6.20% p.a. compounded quarterly.
2. The minimum amount for investment is Rs 100 and there is no limit on the maximum amount. However, the investment must be made in multiples of Rs 10.
3. You can make any number of deposits. No limit on the maximum number of deposits in your RD account.
4. All transactions of recoveries, withdrawals, repayments, etc., under National Saving RD, shall be rounded off to the nearest rupee.
5. To open the RD account you must submit Form-1 to the nearest branch of the Post Office.
6. The maturity period of the National Saving Recurring Deposit Scheme is 5 years.

Use: Post office RD Calculator to plan your investment.

## How to Calculate Interest on Post Office RD?

Interest on post office RD is compound interest. The formula to compute compound interest is:

A = P x (1+R/N) ^ (NT)

Where,

A: Maturity Amount

P: Recurring Deposit Amount

N: Number of times the interest is compounded

R: Rate of interest

T: Tenure

Let’s understand how the interest is calculated with an example. Mr Ishaan opens a recurring deposit account at the post office for 5 years. He plans to invest INR 50,000 and the interest on the RD scheme is 5.80%. Using the above formula, let’s determine the maturity amount for Mr Ishaan

A = P x (1+R/N) ^ (NT) = INR 3,48,484

## Documents Required for Opening Post Office RD Account

The following are the documents required for opening a post office RD account:

• Account opening form
• Two recent passport-size color photographs
• Original and photocopy of Address and Identity proof documents.
• Identity proof for verification at the time of account opening.
• Add a nominee and a signature of a witness.

## Who Can Open an Indian Post Office Recurring Deposit Account?

The following individuals are eligible to invest in the Post Office Recurring Deposit Scheme:

1. A single adult being a resident of India who is above the age of 18 years.
2. Up to 3 resident adults can open joint accounts in their names collectively.
3. A guardian can open an account on the behalf of a minor
4. A guardian can open an RD account on the behalf of a person of an unsound mind
5. A minor who is above the age of 10 years can open the account in his/ her own name.
6. There is no upper limit on the number of accounts an individual can open individually or jointly.

## Deposits under Post Office RD Scheme

1. You must make sixty monthly deposits to your RD account.
2. You can make a deposit either in cash or through a cheque. Further in the case of a deposit by cheque, the date of deposit shall be the date of clearance of the cheque.
3. The minimum deposit amount is Rs 100. You can make the deposits in multiples of Rs 10 only.
4. No limit on the maximum deposit amount.
5. The investor needs to make the first deposit at the time of opening the recurring deposit account. The subsequent deposit to the RD account must also be of the same denomination. Let’s say you want to deposit Rs 5,000 as your first deposit then for the rest of the tenure you need to make a deposit of Rs 5000 per month. Hence, you must choose this denomination very carefully.
6. If you have opened the account before the 16th day of the month then you need to make the subsequent deposits within the 15th day of each month.
7. If you have opened the account after the 16th day of the month then make sure you deposit subsequent installments between the 16th day and the last working day of the month.

## Default in Post Office Recurring Deposits

1.  If you do not deposit the subsequent deposits on or before the due date then a default fee is applicable. The default fee will be Rs 1 per Rs 100 denomination. The fee will be applicable for each month of default till the default continues.
2. After you have defaulted in depositing, you will first deposit the defaulted deposit amount along with the default fee. Only after clearing these dues, you can make a recurring deposit for the current month.
3. The account becomes discontinued if there is a default in depositing for 4 consecutive months. You can revive the account within 2 months from the 4th month of default. However, in case you fail to revive the accounting within this period then the account will remain in the discontinued status. Moreover, you will not be able to make any further deposits.
4. If there are fewer than 4 defaults then you can choose to extend the maturity of the scheme. You can extend the maturity by the number of months of defaults only. Moreover, you need to pay the installment during these extended periods.

## Advance Deposits in Post Office Recurring Deposit Accounts

1. You can make an advance deposit in your RD account for 6 monthly installments. However, the account must not a discontinued account due to a default in deposit.
2. The advance deposit will be inclusive of the month in which you are making such a deposit. Let’s say you want to make an advance deposit for 6 months. The next due deposit month is January. In this case, you can make an advance deposit for the next 6 months including January. Hence, you can deposit only till June. You cannot make an advance deposit till July.
3. Moreover, You can make an advance deposit for any period of up to five years.
4. You can make advance deposits any time of opening the RD account or any time thereafter.
5. In case you make advance deposits then you will receive a rebate. You can make a deposit net of rebate receivable on advance deposit.
6. No rebate is available if the advance deposit is made for a period of fewer than 6 months. Moreover, if the advance deposit is for a period of more than 6 months but less than 12 months then the rebate will available for 6 months only.

## Maturity of  Post Office RD Scheme

1. The maturity of the National Saving Recurring Deposit is 5 years i.e. 60 months from the date of the first deposit.
2. You can extend the maturity by another 5 years by submitting an application in Form-4 to the Post Office of India. The interest rate will be the rate at which the recurring deposit account was opened.
3. You can close the RD account at any time during the extension period. However, if the tenure during such extension period is less than 1 year then the interest rate will be the national savings account interest rate.
4. If an account is discontinued and not revived by the account holder then on its maturity date or extension period the principal amount plus interest earned will be paid.
5. An account holder can opt for retaining the RD account after 5 years of maturity to another maximum period of 5 years. In such a case the account holder will not make any fresh deposit and retain the amount in the account. The original interest rate will be applicable. Moreover, the account holder must file an application in Form-3 to the Post Office of India.
6. If a discontinued account is retained for a period of less than 1 year the interest rate for the extension period will be the national savings account interest rate.

## Premature Closure of Post Office RD

1. A premature withdrawal from the National savings RD account is available after the expiry of 3 years from the date of the initial deposit
2. On account of a premature withdrawal, the interest rate will be the PO Savings Account interest rate.
3. You must submit an application in Form-2 to the nearest branch of the Post Office of India
4. If an advance payment of deposits is made then the withdrawal is allowed after the expiry of the period for which such advance deposit is made.

## Loan Against Post Office Recurring Deposit

1. You can avail of a loan against National Savings Recurring Deposit by submitting an application in Form-5.
2. To avail of the loan, the account must be continued for 1 year and 12 installments must be deposited.
3. You can avail loan facility of up to 50% of the balance credit in the RD account.
4. The account holder can repay the loan either in a lump sum or in equal installments.
5. The account holder must repay the entire amount before the maturity date of the RD.
6. The applicable simple interest rate on loan will be 2% + RD interest rate applicable to the RD account
7. Interest will be applicable from the date of withdrawal till the date of repayment in full and proportionately to the amount of repayment.
8. If you fail to repay the loan amount then the PO will deduct the loan plus interest amount from the maturity value of the RD account.
9. If the account is extended beyond maturity then the repayment can be made during such an extended period.
10. In case you fail to repay the loan in part or full, the due amount will be recovered from you, your legal heir, or the nominee on the closure of the account.
11. If the interest payable on the loan is more than the interest on RD then the account holder needs to pay the net amount.

## Taxation of Post Office RD Scheme

Investment in the post office RD scheme is eligible for tax exemption under Section 80C of the Income Tax Act, 1961. Investments up to INR 1,50,000 per annum qualify for tax exemption. However, the interest earned from the RD scheme is taxable in the hands of the investor. The interest is added to the taxable income and is taxable at the applicable slab rate. Furthermore, if the interest per annum is more than INR 5,000, then TDS is cut. If the investor submits their PAN at the time of account opening, the TDS rate will be 10%. Otherwise, it is 20%.

## Repayment in Case of Death

1. In the case of the death of a single account holder or all the joint account holders, the repayment will be made to the legal heirs or nominees. You cannot make further deposits.
2. If there are up to three surviving nominees or legal heirs then they may continue the RD account. In such a case they can continue as if they are the owners of such an account. All the provisions applicable to the original account holders will be applicable to such surviving nominees or legal heirs. However, they will have to make an application to the Post Office Officer
3. In the case of a joint account, the surviving account holder can continue the RD account. The surviving holder can continue as if he/ she is the sole owner of such an account. However, in case only 6 deposits were made in the account, the surviving member can choose to close the account.
4. In the case of the death of the guardian of a minor or a person of unsound mind, a new guardian can close the account.

## Procedure on Minor Attaining Majority

1. On attaining the age of 18 years the earlier minor can continue the account by fulfilling the due diligence. He/ she needs to provide a declaration.
2. The declaration will be as follows. “I hereby declare that the General Rules and the National Savings Recurring Deposit Scheme, 2019 have been read by/to me and I accept the said rules and the scheme and all such amendments thereto as may be issued from time to time as binding on me”.
3. You can continue the account till maturity, extend the account for another 5 years or pay deposits in advance.
4. Being a major you can make a premature withdrawal, or avail a loan facility, as the case may be.

## Forms Under The PO RD Scheme

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## Frequently Asked Questions

Can Monthly Income Scheme (MIS) interest be credited to Recurring Deposit (RD) account?

No. The interest earned on a Monthly Income Scheme cannot be credited to your Recurring Deposit (RD) account. Interest amount can be credited to your savings bank account. From the savings bank account, it can be transferred to Recurring Deposit (RD) account.

Can I open a Post Office RD account in the name of a minor?

Yes, you can open a Post Office RD account in the name of a minor. On attaining the age of 18 years the minor will have to submit an application to convert the account in his/ her name

Is Post Office RD Tax-Free?

Yes, an investment in a Post Office Recurring Deposit is eligible for a deduction under section 80C of the Income Tax Act. However, the interest income is taxable under the head income from other sources

What happens on the maturity date of the Post Office RD account?

On the maturity of the Post Office RD account, the maturity amount i.e. the investment and interest amount will be credited to your savings account. Alternatively, you can choose to extend the maturity period by another maximum period of 5 years. In such a case you need not make any fresh deposit. You can retain the initial amount in the RD account. However, the original interest rate will be applicable. Further, you need to file an application in Form-3 to the Post Office of India. You can file it either online or by visiting the nearest branch of the Post office

What is the maturity period for India Post Office Recurring Deposit?

The maturity period for India Post Office Recurring Deposit is 5 years from the date of the initial deposit. You have the option to further extend the maturity to another 5 years. You can also make a premature withdrawal after the expiry of 3 years.

Is a premature withdrawal permissible for India Post Office Recurring Deposit?

Yes, a premature withdrawal is permissible for India Post Office Recurring Deposit. However, you can withdraw only after the expiry of 3 years from the date of the initial deposit. You must file an application in Form-2 to the  India Post Office. You can file Form-2 either online or by visiting the nearest branch of the Post office

What happens if the RD installment is not paid in the post office?

If you do not deposit the subsequent deposits on or before the due date then a default fee is applicable. The default fee will be Rs 1 per Rs 100 denomination. The fee will be applicable for each month of default till the default continues. After you have defaulted in depositing, you will first deposit the defaulted deposit amount along with the default fee. Only after clearing these dues, you can make a recurring deposit for the current month.