Post Office Recurring Deposit Vs Post Office Fixed Deposit: Interest Rate, Minimum Amount

If you are still not investing anywhere, you may be wondering where all your monthly income disappears. And if you are one of those who keep hoarding money in savings bank accounts, you are certainly not going to get a good return on your investments. The best way to grow your wealth is to start investing. The investment amount may be small but it is important to make a start and think of investing for a long term, say financial planners. For individuals who do not want to invest your money in share market, fixed income options such as recurring deposits (RDs) and fixed deposits (FDs) may be a good idea.

The Department of Posts or India Post offers both recurring deposits and term or fixed deposits under its banking products. India Post offers nine saving schemes, including RDs and FDs, according to its website, indiapost.gov.in.

Given below are the key features, interest rates and the minimum/maximum amount required in a post office recurring deposit or fixed deposit:

5-Year Post Office Recurring Deposit Account (RD)

Features of RDs
An RD account can be opened by cash or cheque and in case of cheque, the date of deposit will be the date of presentation of cheque.

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

The RD Account can be transferred from one post office to another.

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

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

An RD account can also be opened jointly by two adults.

A subsequent deposit can be made up to 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 account is opened between 16th day and last working day of a calendar month.

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

If in any RD account, there is monthly default amount, the depositor has to first pay the defaulted monthly deposit with default fee and then pay the current month deposit, according to India Post. 

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

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

A minor after attaining majority has to apply for conversion of the account in his or her name.

One withdrawal up to 50 per cent of the balance allowed after one year.

Full maturity value allowed on RD accounts restricted to that of Rs 50 denomination in case of death of depositor subject to fulfillment of certain conditions.

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 rate on post office recurring deposit accounts
From 1.01.2018, interest rate is 6.9 per cent per annum (quarterly compounded). On maturity, Rs 10 account fetches Rs 717.43. The RD account can be continued for another five years on year-to-year basis.

Minimum Amount for opening of post office recurring deposit account and maximum balance that can be retained
A minimum of Rs 10 per month or any amount in multiples of Rs 5 is required to open an RD. There is no maximum limit.

Post Office Time Deposit (TD) Account or Fixed Deposit (FD) Account

Features of post office FD accounts
FD accounts may be opened by any individual.

An FD account can be opened by cash /cheque and in case of cheque the date of realization of cheque in government account shall be the date of opening of account.

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

An FD account can be transferred from one post office to another.

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

FD accounts 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 FD account can be opened by two adults.

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

A minor, after attaining majority, has to apply for conversion of the account in his name.

An under five-year investment in fixed deposits qualifies for tax benefit under Section 80C of the Income Tax Act, 1961.

Interest rates on post office FD accounts
Interest rates from 1.01.2018