Post Office Recurring Deposit Account

Recurring deposit account is a systematic way of saving money. The scheme is meant for those investors who want to deposit a fixed amount regularly on monthly basis in order to get a tidy sum after a definite time on the maturity of the account.

How to Open an Account

The Recurring deposit account can be opened at any post office all across India. Currently 7.5% quarterly compounded rate of interest is paid.

Who Can Invest

*. Any adult

*. Two adults jointly

*. A guardian on behalf of a minor or a person of unsound mind.

*. A minor who is minimum ten years

Maturity

Period of maturity of account is5 years. Sixty equal monthly deposits shall be made in an account in multiples of Rs. five subject to a minimum of ten rupees. If it is a joint account, itis paid on maturity

a) jointly or survivor

b) to either of them or survivor

Premature Closure

Premature closure of accounts is permissible after expiry of three years. In case of premature closure of account, the interest at the rate applicable to post office savings account shall be payable.

Taking of Loan

50% of the deposits made in the account may be allowed as loan after the account has beenin operation for minimum one year.

Salient Features

*. Nomination facility available

*. Rebate on advance deposits available

*. Fixed rate of return for the duration of the deposit

Extension and Retention of Account

Post maturity, account holders could decide to continue account for a further period of five years and make monthly deposits during such extended period. The depositors could also decide to continue the account and retain in it the amount of repayment due for afurther period upto maximum of five years without making any fresh deposits.

Income Tax Benefits

There is no Tax Deduction at source

Comparison Between Post office RDs and Bank RDs

*. Post office recurring deposit account (RDA) has a fixed tenure of five years. Bank recurring deposits offer a flexible time period. A bank RDA can be opened for a minimum period of 6 months, and thereafter in multiples of 3 months up to a maximum period of 10 years.

*. The minimum investment in post office RDA is Rs.10. In case of banks minimum investment varies. Minimum monthly installment in case ofrecurring deposit with SBI is Rs.100, where as it is Rs.500 incase of ICICI.

*. Post-office deposits offer a fixed rate of return for the duration of the deposit, whilebanks constantly review their recurring deposit rates.

*. Bank RDAs are more convenient in the sense that the amount is automatically debited from your account. In case of post office RDAs you will have to visit post office every month.

*. In post office RDA, one can withdraw up to half the balance. On premature closureof the account (after one year), interest is payable as per the rate for the Post OfficeSavings Bank Account. Premature closure in case of Bank RDA will result in a penalty and the depositor willget interest around 1 per cent less than the prevailing rate. But in any case it will be higher than the interest rate for Post Office Savings Bank Account.