Post Office – Recurring Deposit

Post office Recurring Deposits (PO RDs) is an instrument that enables regular saving of small amounts. Eligibility: It can be opened by any individual, singly or jointly. Non-Resident Indians (NRIs) are not eligible to open RD account. Investment Limits:  The minimum account balance is Rs. 10 with no maximum limit. Rate of Return: The recurring deposits account earns an interest of 6.9% per annum, compounded quarterly. Time Period: PO RDs have a the term of 5 years. After maturity of the account, it can be continued for a further period of 5 years with or without further deposits. Withdrawal: One withdrawal(Advance against Deposit) is permitted from the account on completion of one year from the date of opening subject to a maximum of 50% of the balance. However, interest on such advance is charged at 15% per year. The account can be prematurely closed after completion of 3 years from the date of opening. The interest rate on such an account will be payable at the prevailing Post Office Savings Account. Tax Treatment: There is no tax benefit associated with investment in PO RDs. Others: A maximum of four defaults of the monthly installment are allowed in an account. After four defaults the account is treated as ‘discontinued’. A discontinued account can be revived by paying the defaulted deposits within two months from the fifth default. If it is not, the account cannot be continued. Wealth Cafe Note: Positives: Very good for regular saving in small amounts at a decent rate of return. Almost Risk-Free returns. Negatives: There are no tax benefits associated with PO RDs. Conclusion: PO RDs are is the best tool for savings small amounts (starting with as low as Rs. 10) on a regular basis.

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