Post Office Recurring Deposit

What is Recurring Deposit in Post Office?

Post office Recurring Deposit is amongst the 9 small savings schemes that are backed by the Government of India and offer a fixed, predetermined interest rate.

Similar to a bank RD, an individual needs to make regular small payments over the long term instead of paying a lump sum, in a post office RD. 

An individual needs to invest for a minimum tenure of 5 years which makes post office recurring deposit a mid-term investment option. Having a fixed, predetermined interest rate makes it completely risk-free.

The scheme serves as an option for both conservative and new investors to deposit a fixed sum at regular intervals and earn interest.

 It is suitable for college students, salaried individuals, and homemakers who have a small sum to deposit over the long term, but not a big sum like in the case of an FD.

Features of Post Office Recurring Deposit

Post office Recurring Deposit is one of the most popular savings instruments which can be attributed to the fantastic features it offers. Here are the features of a post office Recurring Deposit

  • Amount: The minimum amount required for opening a post office RD is ₹10 per month, and the maximum amount can be any amount in multiples of Rs. 5 with no upper limit.
  • Maturity tenure: Minimum tenure of investment is 5 years. The investment tenure can be stretched for the next 5 years as well.

  • Interest Earned: RD schemes offer a pre-decided rate of interest which remains fixed throughout the RD tenure. The interest is compounded quarterly and helps investors in generating earnings on a frequent basis.

  • Nomination: The post office Recurring Deposit scheme allows applicants to choose a nominee to receive the fund payout in case of death. Investors can choose a nominee when they are opening the account or afterward as well.
  • Easy Accessibility: In case you change your address, a post office recurring deposit can easily be transferred from one post office to another. In fact, one can open any number of accounts in several post offices in the country.

  • Prematurely Closure: Post office Recurring Deposit account can be prematurely closed after 3 years.

  • Transfer of Funds: Post office Recurring Deposit accounts allow for a convenient transfer of funds from the depositor’s RD account to their savings account.

  • Rebate: Post office Recurring Deposit allows a rebate to motivate people into depositing money in advance.

How to Calculate Interest on Recurring Deposit in Post Office?

You can easily calculator interest on an RD in the post office by using the formula:

A = P*(1+R/N)^(NT)

The variables in this equation represent –

A = Maturity Amount

P = RD Instalment each month

R = RD interest rate in percentage

N = Compounding Frequency (no. of quarters)

T = Tenure

How to Open Recurring Deposit in Post Office?

To open a Recurring Deposit in a post office, you have to visit your nearest post office and fill out the RD form. After filling in details of the monthly installments and RD tenure, you need to submit it along with the pay-in-slip with your first deposit. That being said, the account opening forms are a bit different for senior citizens.

Post Office Recurring Deposit Online

Yes, you can open a post office Recurring Deposit account online. You need to visit: But you need to get your account activated for online banking by submitting a request form in the relevant post office.

Eligibility Criteria for Recurring Deposit Account

  1. Any individual including members of the Hindu Undivided Family (HUF), senior citizens, and Non-Residential Indians (NRIs).
  2. An individual above the age of 10 is a minor but is eligible to open the RD account if he/she can provide the documents with details. 
  3. An individual below the age of 10 years can also open the account under a legal or natural guardian. 
  4. Any government or corporate, company, proprietorship, or commercial organisation.

How to make payments for Post Office RD?

You can deposit your payments for post office RD, both offline and online.

Offline Payment Post Office Recurring Deposit

You can visit the post office and make an offline payment using a cheque or cash for the Recurring Deposit.

Online Payment Post Office Recurring Deposit

Recently an app called  India Post Payments Bank (IPPB) has been launched. With this app, the monthly installments of RD can be transferred online into your post office RD account. Due to the new payment facility available, you don’t need to visit the post office every month to make payments on the spot. You can visit the post office just once for opening the RD account after which you can manage everything through the IPPB app on your mobile.

Here’s how to transfer money in your post office RD account through IPPB

  1. Add money to your IPPB account. The transfer will basically happen from your bank account.
  2. Go to DOP Products, from there you can choose Recurring Deposit.
  3. Enter your RD account number and then DOP customer ID.
  4. Choose the installment duration and amount
  5. Once the payment is successfully made, IPPB will then notify you through IPPB mobile application

Post Office Recurring Deposit Interest Rate

The RD interest rate offered by the post office for this quarter – October to December 2020 is 5.80%.

This interest rate is not fixed and changes every quarter (3 months).

Partial Withdrawals of Recurring Deposit with Post Office

One can withdraw the permissible amount which is 50% of the balance after one year. However, it needs to be repaid in lump-sum along with the interest applicable. A simple rate of interest, maybe around 1%, would be applied to the withdrawn funds. 

However, in the case of minors, they need to convert their accounts into the regular RD accounts for withdrawing money. Needless to say,  that is possible only once they mature.

Post Office Recurring Deposit Rebate

A post office Recurring Deposit allows for a rebate to entice people into making advance payments. Although the rebate is not much, it still helps small account holders in maximising their earnings. 

If the number of advance deposits installments is 6 – Rs.10 for every Rs.100

If the number of advance deposits installments is 12 – Rs.40 for every Rs.100

Delayed RD Deposits 

If for any reason your installment to your Recurring Deposit is delayed, you will have to pay a penalty of Rs.1 for every Rs.100. Remember that this fine needs to be paid in addition to the missed RD installments for the account to be revived.

However, if your payments are consecutively not transferred for 4 months then your RD account will be discontinued.

A discontinued account can be revived within a period of 2 months after the discontinuation date after which it will be permanently shut off. 

Taxation on the Post Office RD Account

The installments or principal amount deposited in a post office Recurring Deposit account is exempted from tax deductions under Section 80C of the Income Tax Act, 1961. An individual can claim up to Rs.1.5 lakh per annum as tax exemption under Section 80C. 

However, the interest generated through the post office Recurring Deposit will be subjected to tax deductions by the government. The interest earned will be added under the section “income from other sources” and will be taxed as per the income tax slab.

TDS on post office RD – In case the interest you earn on your post office RD exceeds Rs.40,000 ( it was Rs. 10,000 before budget 2019) you are liable to pay Tax Deducted at Source or TDS. The deduction will have a rate of 10%, in case you are holding an active PAN card. In case you don’t have an active PAN card will have to pay TDS at the rate of 20%.


Ques 1. What is the Post Office Recurring Deposit Interest Rates for 2020?

Ans 1. The RD interest rate offered by the post office for this quarter – October to December 2020 is 5.80%.

Ques 2. How is RD interest calculated?

Ans 2. RD interest is calculated through compounding on a quarterly basis by using the formula A = P*(1+R/N)^(NT). 

Ques 3. Are Post office RDs tax-free?

Ans 3. Yes, post office RDs are tax-free under Section 80C of the IT act. This is so because they have a minimum maturity tenure of 5 years.


Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.