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Post Office Recurring Deposit - Interest Rate, Meaning, Benefits, Details etc.

Published On Nov 20, 2021

There are a total of 9 savings schemes which are backed by the Government of India which includes the Post Office Savings Scheme. The Post Office Recurring Deposit is a mid-term savings scheme where depositors are required to park their investments for a minimum of 5 years.

Since the recurring deposit does not depend on the market, it is deemed risk-free and caters to investors with a lower risk appetite, as well as, investors who are depositing their money in a scheme for the first time. The recurring deposit scheme requires a fixed sum to be deposited into the account at regular intervals for which interest is accrued on them and compounded quarterly.

For the investors who like security on their investments and wish to earn a steady sum of money as interest, the Post Office RD would be an ideal investment. Moreover, this scheme would be also beneficial for the people to earn a fixed sum of money and wish to generate over time and earn a fixed income.

Eligibility Criteria for the Post Office Recurring Deposit

The primary eligibility criteria to open an RD account in a Post Office would be the following:

  • Applicants must be an Indian national and over 18 years old.
  • Minors who are above the age of 10 years.
  • Parents/guardians of a minor to open an account on behalf of the latter.
  • For the minors, the RD account will be held jointly by the guardians or parents and for the applicants above 18 years old, the account will be under the name of the primary applicant.

Features of the Post Office Recurring Deposit

The RD offered by the Post Office offers a wide range of benefits and features. The features of a Post Office RD are the following:

  • Limited Restrictions

To open an RD account, investors can deposit as low as Rs.10 per month and does not have any upper limit. The applicants can deposit their money while opening their RD account in a post office through cash or cheque.

  • Operations

A Post Office RD can be operated in a joint manner if the RD has been opened under the name of a minor. Two individuals can operate the account. If a person who is above the age of 18 years opens the account, the account can be operated by the primary applicant singly or jointly as well.

  • Interest

This RD scheme offers a fixed rate of interest and is competitive in the market. The interest accrued is compounded quarterly and helps investors generate earnings on a frequent basis.

  • Nomination

The scheme allows applicants to choose a nominee to receive the payout in case of death. Investors can choose the facility of nomination during the opening of the account in the post office. They can also do so after the account is opened as well.

  • Transfer of Funds

RD account holders can transfer funds from their RD to their savings account easily and they can open any number of accounts in the several post offices in the country.

  • Facility of Rebate

Individuals can also opt for the rebate facility on the deposits given in advance but the facility is limited to 6 installments only.

  • Withdrawal

The Post Office RD allows applicants to withdraw their funds from the account with ease. Account-holders can withdraw up to 50% of their deposit balance a year after the account has been opened.

Rate of Interest on Post Office Recurring Deposit

An interest rate of 5.8% is offered on the Post Office Recurring Deposit which makes it among the top investment options for people.

The compound interest is calculated each quarter and is one of the top advantages of the scheme. Individuals can have a strong corpus at their disposal during the time of maturity and would assist in financial stability and creation of wealth as well for the long run.

How to Calculate Interest on the Post Office RD Account?

The interest on the Post Office Recurring Deposit is offered based on the compounding principle. The formula for compound interest mentioned below is used to calculate the interest:

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

A = Maturing Amount

P = Recurring Amount

N= Number of times the interest has been compounded

T= Tenure

R= Rate of interest

Taxation on the Post Office RD Account

The Post Office RD account is exempted from tax deductions under Section 80C of the Income Tax Act and individuals can claim up to Rs.1.5 lakh per annum as tax exemption under this section. However, the interest which is generated through the Post Office RD will be subjected to tax cuts. The account holders will be required to pay tax on the interest amount as per the income tax slab.

Apart from this, an interest which exceeds Rs.10,000 will be liable for a TDS deduction and individuals holding an active PAN card will be required to pay TDS at the rate of 10% and those without an active PAN card will have to pay TDS at the rate of 20%.


A Post Office Recurring Deposit is a viable option for the people who are new to investing and wish to accumulate wealth over a period of time, without indulging in market risks. Moreover, since the Post Office RD is backed by the government, the funds deposited will generate wealth at a steady rate of interest and will not be subjected to the trends of the market.

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Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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