Vishal

Post Office RD and TD/FD

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In this Post, I will discuss various types of saving schemes available in Post Offices. I will discuss Post Office RD and TD/ FD scheme in this post.

A. 5-Year Post Office Recurring Deposit Account (RD)

I have already discussed Recurring Deposits (RD) and Fixed Deposits (FD) in an earlier post, you may go through that post here is the link.

Salient features:

  1. Account may be opened by
    (i) a single adult
    (ii) Joint Account (Maximum 3 adults)
    (iii) Minor above 10 years of age
    (iv) A guardian on behalf of a minor/Person of unsound mind
  2. For account opening you have to visit nearest Post office and submit required KYC documents and fill the form or if you have Post office saving account and you have already taken net banking facility of Post office Payment bank you can open RD online also. In any case you have to visit Post office either for opening account or RD
  3. Current Interest payable: 5.8 % per annum (quarterly compounded), decided by government every quarter
    RD can be opened with Minimum INR 100/- per month or any amount in multiples of INR 10/-. No maximum limit.
  4. Tenure is 5 Years.
  5. Nomination facility is available at the time of opening and also after opening of account
  6. Premature closure is allowed after three years from the date of opening of the account and interest at the rate applicable from time to time to the Post Office Savings Account shall be payable on such premature closure of account.
  7. Account can be transferred from one post office to another
  8. Any number of accounts can be opened in any post office
  9. If subsequent deposit is not made up to the prescribed day, a default fee is charged for each default, default fee @ 1 Rs for every 100 rupee shall be charged. After 4 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
  10. One loan up to 50% of the balance allowed after one year. It may be repaid in one lump sum along with interest at the prescribed rate at any time during the currency of the account
  11. Online Deposit facility is available through Intra Operable Net banking/Mobile Banking,
    Online Deposit facility is available through IPPB Saving Account
  12. Date of maturity will be 5 years after date of opening. Account can be extended for further 5 year by giving application at account office
  13. Interest earned from RD is taxable as per slab and should be declared under Income from other sources in Income tax return form.

TIPS-

  1. If interest offer on post office is not much higher when compare to Bank RDs of 5 years, then Bank RDs can be preferred as Bank RDs offer flexible tenures of few months to any no. of years from 1 to 5 Years and also they are easy to maintain online in your existing saving bank account and can be prematurely closed or renewed / redeemed online at your own convenience.
  2. You can always opt multiple RDs of different tenure and amount suiting to your income and can convert matured RDs into FDs if money is not needed on maturity to continue to earn interest on your Investment.



B. Post Office Time Deposit Account (TD)

Post office TD is similar to FD offered by Banks. Post office TDs are available with tenure of 1/2/3/4/5 years and with varied interest rates which is decided every quarter by Govt.

Salient features:

  1. Account may be opened by
    (i) a single adult
    (ii) Joint Account (Maximum 3 adults)
    (iii) Minor above 10 years of age
    (iv) A guardian on behalf of a minor/Person of unsound mind
  2. Minimum INR 1000/- and in multiple of 100. No maximum limit.
  3. Tenure available- 1/2/3/5 years
  4. Current interest rates- 5.5% for 1/2/3 Yrs and 6.7% for 5 year TD.Interest is payable annually but calculated quarterly.
  5. Nomination facility is available at the time of opening and also after opening of account
  6. Account can be transferred from one post office to another
  7. Any number of accounts can be opened in any post office
  8. Single account can be converted into Joint and Vice Versa
  9. Premature encashment not allowed before expiry of 6 month, If closed between 6 month to 12 month from date of Opening, Post Office Saving Accounts interest rate will be payable
  10. The investment under 5 Years TD qualifies for the benefit of Section 80C of the Income Tax Act, 1961 from 1.4.2007. But note interest received after maturity is taxable at slab rate.
  11. Online Account Opening facility is available through Intra Operable Net banking/Mobile Banking

TIPS-

  1. Again if you are comfortable with FD rates offered by your saving Bank then you can opt for Bank FDs as they are more convenient to open/close/redeem online and in maximum Banks redeem FD money get credited to your account within few hours. In that way you will be not required to visit Post office for TD related transaction. Although nowadays Post Office is offering online account with TD, RD facilities but their portal is not so robust when compare to Banks.
  2. Generally money required for emergency purposes is kept in FDs so first thing you need is to get the money in fastest way when emergency occurs for this you must have internet banking facility for your account so that you can redeem FD money within few minutes/hours at your convenience without visiting Branch.
  3. Always try to divide your FDs into few smaller FDs so that you have don’t have to break FD of a larger amount when your requirement is only part of your total FD.


Hope you find this post informative. Any suggestion/question can be posted in comment sections. Hindi Version of this post will be made available in a few days.

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