Interest Rates On Post Office Saving Schemes Compared : PPF Vs Recurring Deposit

The Department of Posts or India Post, run under the Ministry of Communications, offers both public provident funds (PPF) and recurring deposit (RD) saving schemes. PPF and RD are among the nine small saving investment schemes offered by India Post, according to its website, indiapost.gov.in. Both PPF and RD can be started with minimal investment amounts and thus may be considered for investment by customers. Interest rates on small savings schemes are decided by the government every quarter. PPF also offers tax deduction under Section 80 (C) of the Income Tax (IT) Act.

(Also Read: Post Office Saving Schemes - 5 Key Things To Know)

Given below is a comparison of features and interest rates of PPF and RD under India Post's small savings schemes:

Key features of PPF accounts:

An individual can open a PPF account with Rs 100 but has to deposit minimum of Rs 500 in a financial year and a maximum of Rs 1,50,000.

A joint PPF account cannot be opened.

A PPF account can be opened by cash / cheque. In case of cheque, the date of realization of the cheque in the government account shall be the date of opening of the account.

A nomination facility is available at the time of opening and also after opening of the account. The PPF account can be transferred from one post office to another.

The subscriber can open another account in the name of minors but it is subject to the maximum investment limit by adding balance in all accounts.

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The maturity period of PPF accounts is 15 years but the same can be extended within one year of maturity for further five years and so on.

The maturity value can be retained without extension and without further deposits also.

A premature closure is not allowed before 15 years.

PPF deposits qualify for deduction from income under Section 80C of IT Act.

Interest on PPF is completely tax-free.

(Also Read: India Post ATM Cash Withdrawal Charges, Rules, Transaction Limits And Other Details)

Withdrawal from PPF accounts is permissible every year from the seventh financial year from the year of opening the account.

A loan facility against PPF is available from third financial year onwards.

Key features of RDs:
RD accounts can be opened by cash / cheque and in case of cheque the date of deposit shall be the date of presentation of cheque.

A nomination facility is available in RD accounts at the time of opening and also after opening of the account.

(Also Read: Post Office Saving Schemes: Interest Rates Offered On PPF, NSC, SCSS)

RD accounts can be transferred from one post office to another.

Any number of RD accounts can be opened in any post office.

RD account can be opened in the name of minor and a minor of 10 years and above age can open and operate the account.

A joint RD account can be opened by two adults.

Subsequent deposits in RDs can be made up to the 15th day of next month if the account is opened up to 15th of a calendar month and up to the last working day of next month, if the account is opened between 16th day and last working day of a calendar month.

(Also Read: Post Office Savings Account - Minimum Balance Requirements, Interest Rates, Other Rules Explained)

If the subsequent deposit is not made up to the prescribed day, a default fee at Rs 0.05 for every 5 rupee is charged for each default. After four regular defaults, the account gets discontinued and can be revived in two months but if the same is not revived within this period, no further deposit can be made.

There is a rebate on advance deposit of at least six instalments.

One withdrawal from RD account up to 50 per cent of the balance is allowed after one year.

A single RD account can be converted into joint and vice versa.

(Also Read: SBI Savings Accounts Compared To Post Office Savings Accounts)

In case of deposits made in RD accounts by cheque, the date of credit of cheque into government accounts shall be treated as the date of deposit.

Interest rates on PPF:
From 1.01.2018, PPF deposits fetch an interest rate of 7.6 per cent per annum (compounded yearly).

Interest rates on RD:
From 1.01.2018, interest rate on RD accounts is fixed at 6.9 per cent per annum (quarterly compounded). On maturity, a deposit of Rs 10 in the RD account fetches Rs 717.43. The RD can be continued for another five years on a year-to-year basis.

(Also Read: Latest Interest Rates Offered By Post Office Small Saving Schemes)

Minimum Amount for opening of PPF accounts and the maximum balance that can be retained:
A minimum of Rs 500 and a maximum of Rs 1,50,000can be deposited in PPF accounts in a financial year. The deposits can be made in lump-sum or in 12 instalments.

(Also Read: SBI Recurring Deposit Vs Post Office Recurring Deposit)

Minimum amount for opening of RD account and the maximum balance that can be retained:
A minimum of Rs 10 per month or any amount in multiples of Rs 5 is required as a minimum deposit in RD accounts. There is no maximum limit.