The Post Office Recurring Deposit (RD) Scheme is also known as the National Savings Recurring Deposit Account. It is a government-backed savings plan offered by India Post under the National Savings Institute (NSI), Ministry of Finance. This article focuses on the specifics of investing in the Post Office RD Scheme in 2025, including its features, benefits, maturity value, and answers to frequently asked questions.
What is Post Office Recurring Deposit Scheme ?
The Post Office RD Scheme is a 5-year savings plan ideal for individuals with regular income who wish to save systematically. With a sovereign guarantee from the Government of India, it offers capital protection and assured returns, making it a preferred choice for risk-averse investors. For an investment of ₹1000 per month, the scheme provides a secure way to build a corpus over time while earning quarterly compounded interest.
Interest Rate for 2025
For the period of April to June 2025 (Q1 FY 2025-26), the Post Office RD interest rate is 6.7% per annum, compounded quarterly. The rate is reviewed quarterly by the Ministry of Finance and may change based on yields from government securities. The interest rate at the time of account opening applies for the initial 5-year tenure, and if extended, the rate at the time of extension applies.
Maturity Value for ₹1000 Monthly Investment
Investing ₹1000 per month for 5 years (60 monthly deposits) at 6.7% p.a. (compounded quarterly) yields a significant corpus. Using the Post Office RD formula:
Maturity Amount (M) = R * [(1 + i)^n – 1] / [1 – (1 + i)^(-1/3)]
Where:
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R = Monthly deposit (₹1000)
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i = Quarterly interest rate (6.7% / 4 = 0.01675)
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n = Number of quarters (5 years * 4 = 20)
Calculation:
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Total investment = ₹1000 * 60 = ₹60,000
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Maturity amount ≈ ₹71,366
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Interest earned ≈ ₹71,366 – ₹60,000 = ₹11,366
Thus, depositing ₹1000 monthly for 5 years at 6.7% p.a. will yield approximately ₹71,366 at maturity.
Extended Tenure (10 Years): If the account is extended for another 5 years with continued ₹1000 monthly deposits at the same interest rate (assuming 6.7% p.a.), the total corpus after 10 years would be approximately ₹1,66,000, with interest earned around ₹46,000.
Key Features of the Post Office RD Scheme
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Tenure: Fixed at 5 years (60 monthly deposits), extendable for another 5 years upon application.
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Minimum and Maximum Deposit:
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Minimum: ₹100 per month, in multiples of ₹10.
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Maximum: No upper limit, making ₹1000 a feasible and popular choice.
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Interest Calculation: Interest is compounded quarterly, credited at maturity or upon closure.
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Eligibility:
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Indian residents above 18 years (single or joint accounts, up to 3 adults).
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Minors above 10 years can open accounts in their own name.
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Guardians can open accounts for minors or persons of unsound mind.
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Deposit Flexibility: Deposits can be made via cash or cheque. For cheque deposits, the date of clearance is considered the deposit date.
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Advance Deposit Rebate:
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6-month advance deposit (₹6000 for ₹1000/month): ₹10 rebate per ₹100 denomination (₹60 rebate for ₹6000).
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12-month advance deposit (₹12,000): ₹40 rebate per ₹100 denomination (₹240 rebate for ₹12,000).
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Loan Facility: After 12 monthly deposits and 1 year of account activity, a loan of up to 50% of the balance can be availed. Interest is charged at 2% above the RD rate, repayable in a lump sum or installments.
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Premature Withdrawal: Allowed after 3 years, with interest at the Post Office Savings Account rate (4% p.a. as of 2025) for the period the account was active, not the RD rate.
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Default Rules:
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A penalty of ₹1 per ₹100 (₹10 for ₹1000) is charged per defaulted month.
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Up to 4 defaults are allowed. The account becomes discontinued after 4 defaults but can be revived within 2 months.
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For fewer than 4 defaults, the maturity period can be extended by the number of defaulted months, with missed deposits cleared during the extension.
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Nomination: Account holders can nominate beneficiaries to claim the balance in case of their demise.
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Transferability: Accounts can be transferred between post offices across India at no cost.
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Tax Benefits:
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Deposits qualify for a tax deduction of up to ₹1.5 lakh per year under Section 80C of the Income Tax Act.
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Interest earned is taxable as per the investor’s income tax slab, with no Tax Deducted at Source (TDS).
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What are Benefits of Investing ₹1000 Per Month in Post Office RD ?
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Government-Backed Security: Backed by the Ministry of Finance, the scheme ensures zero risk to the principal and interest.
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Disciplined Savings: Fixed monthly deposits encourage financial discipline, ideal for salaried individuals or those with regular income.
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Tax Savings: Contributions up to ₹1.5 lakh annually are deductible under Section 80C, reducing taxable income.
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Flexible Deposits: No upper limit on deposits allows investors to scale up contributions if desired, while ₹1000 is affordable for most.
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Loan and Withdrawal Options: Access to loans after 1 year and premature withdrawal after 3 years provide liquidity in emergencies.
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Attractive Returns: Quarterly compounding at 6.7% p.a. offers better returns than savings accounts and comparable safety to fixed deposits.
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Accessibility: With over 1.55 lakh post offices, 90% in rural areas, the scheme is widely accessible.
How to Open a Post Office RD Account ?
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Visit a Post Office: Locate a nearby post office offering RD accounts.
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Fill Application Form: Obtain and complete the RD account opening form (Form-1) from the post office or India Post website.
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Submit KYC Documents:
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Identity proof (Aadhaar, PAN, passport, voter ID).
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Address proof (utility bill, rental agreement).
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Passport-size photographs.
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Aadhaar and PAN are mandatory; if Aadhaar is not available, provide proof of application and submit Aadhaar within 6 months. PAN must be submitted within 2 months if not provided at opening.
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Make Initial Deposit: Deposit ₹1000 (or desired amount) via cash or cheque.
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Nomination: Provide nomination details for beneficiaries.
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Receive Passbook: Upon processing, the post office issues a passbook detailing deposits, interest, and maturity value.
Online Management: While accounts cannot be opened or closed online, some post offices and banks linked with India Post Payments Bank (IPPB) allow online deposits and balance checks.
Post Office RD Calculator
A Post Office RD Calculator, available on platforms like ClearTax, Scripbox, and Paisabazaar, helps estimate returns. Input the following:
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Monthly Deposit: ₹1000
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Tenure: 5 years
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Interest Rate: 6.7% p.a.
Output:
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Total Investment: ₹60,000
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Interest Earned: ₹11,366
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Maturity Amount: ₹71,366
The calculator is free, accurate, and simplifies financial planning by allowing users to experiment with different deposit amounts and tenures.
Frequently Asked Questions (FAQ)
Q1: What is the interest rate for a Post Office RD in 2025?
A: The interest rate for April to June 2025 is 6.7% per annum, compounded quarterly. It is reviewed quarterly and may change.
Q2: How much will I get by investing ₹1000 per month for 5 years?
A: At 6.7% p.a., investing ₹1000 monthly for 5 years yields approximately ₹71,366, with ₹11,366 as interest.
Q3: Is the interest earned on Post Office RD tax-free?
A: No, the interest is taxable as per your income tax slab. However, deposits qualify for a tax deduction under Section 80C up to ₹1.5 lakh annually, and no TDS is deducted on interest.
Q4: Can I open a Post Office RD account online?
A: Currently, RD accounts must be opened in person at a post office. However, online deposits and balance checks are available through IPPB or linked bank accounts in some cases.
Q5: What happens if I miss a monthly deposit of ₹1000?
A: A penalty of ₹10 (₹1 per ₹100) is charged per defaulted month. Up to 4 defaults are allowed. After 4 defaults, the account is discontinued but can be revived within 2 months.
Q6: Can I take a loan against my RD account?
A: Yes, after 12 deposits and 1 year, you can borrow up to 50% of the balance. The loan interest rate is 2% above the RD rate, and repayment can be in a lump sum or installments.
Q7: Can I withdraw my RD amount before 5 years?
A: Premature withdrawal is allowed after 3 years, but you receive interest at the Post Office Savings Account rate (4% p.a.) instead of the RD rate.
Q8: Can a minor open a Post Office RD account?
A: Yes, minors above 10 years can open an account in their own name. Guardians can also open accounts for minors below 10.
Q9: What happens to my RD account if I pass away?
A: The nominee or legal heir can claim the balance by submitting a claim form at the post office. They can also continue the account until maturity.
Q10: Is there a limit on the number of RD accounts I can open?
A: No, there is no limit on the number of RD accounts an individual can open, individually or jointly.
For more information visit : https://www.indiapost.gov.in/Financial/pages/content/post-office-saving-schemes.aspx
Also visit : https://postofficefd.com/sbi-monthly-income-scheme/