Post Office Recurring Deposit Scheme (PORDS) {डाकघर आवर्ती जमा खाता योजना}

Updated on Aug 30, 2020

Overview

Post office recurring deposit scheme is one of the nine saving plans which are supported by the Government of India. 

Post office RD works as a mid-term investment option, where the investors need to keep their deposits active for at least five years. Post office RD does not require any risks, and it solves the purposes of people who do not like to invest where high stakes are involved, and it is also curated for first-time investors. This scheme is made for people who want a stable income in the form of interest. Under this scheme, the investor needs to deposit a fixed amount into their account at regular intervals, and they get part, compounded quarterly, in return. 

Background

In the working of an economy, post offices play a significant role. The main functions of circulating mail across the country, but it also has many other functions such as providing financial services that work as a saving scheme to its customers, and they are free of the market risks. 

Post Office RD scheme is suitable for those people who earn a stable income and want to yield more money from it by investing it somewhere. It is also ideal for first-time investors and investors who do not like taking risks. 

Eligibility Criteria

  • An Indian national who is above the age of 18 years. 
  • In the case of minors above the age of 10 years, the RD account will be held by the parents or the guardians of the child and the account will be in the name of the primary applicant.

Features 

  • To open an account under this scheme, the minimum amount to be deposited is Rs. 10, and there is no maximum amount limit. The money can be deposited in the mode of cash or cheque, at the time of opening the account. 
  • If the Recurring Deposit account gets opened in the name of a minor, then the Post office RD can function jointly, i.e. two people can run the account. 
  • The Post Office Recurring Deposit scheme gives out a fixed and competitive rate of interest. 
  • The interest accrued under the scheme is compounded quarterly.
  • Under this scheme, the applicants also get the option to select a nominee, who will receive the money in case of the investor's death. This option is given at the time of opening the RD account; the investors can do it at a later stage as well. 
  • There is no limit of opening the Number of RD accounts in various post offices all across the country. 
  • Up to 6 instalments, the applicants will also get a rebate facility, on their advance deposits.
  • After one year after the applicants open their account, they can withdraw up to 50% of the deposited balance under the Post Office Recurring Deposit Scheme.    

Rate of Interest 

  • The interest rate offered under the Post Office Recurring Deposit Scheme is 7.2% per annum which also makes it one of the most desirable investment options that are available in the market. 
  • Another perk of this scheme is that it provides an extended compound interest at each quarter.

Interest

The interest offered on the Post Office Recurring Deposit depends on the compounding principle. 

The formula for calculating the compound interest which is used in the calculation is-

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

Where:

  • A = Maturing Amount
  • P = Recurring Amount
  • N= Number of times the interest has been compounded
  • T= Tenure
  • R= Rate of interest

Tax

According to Section 80C, the post office recurring deposit account is exempted from taxes.

On the other hand, the interest which is collected under the post office RD scheme is not exempted from taxes. According to the rates of the income tax slab, the investors will have to pay the taxes. 

If the interest generated exceeds the amount of Rs. 10,000, then the investor will have to pay TDS as well. The interest rate of TDS deduction for people with an active PAN will be 10%, and an inactive PAN will be 20%. 

Rebate Facility 

Rebate is a discount that is provided to the account holder to boost their will to deposit into their account in advance. 

In the case of the Post Office Recurring Deposit Scheme, the facility of the rebate is given to the individuals who deposit the money at least six months in advance. These rebates are available on the amount of deposit equivalent to at least six instalments.

Premature Withdrawal Facility 

Along with a simple rate of interest which will be applied on the amount withdrawn, 

the applicants can remove up to 50% of the deposited balance under the Post Office Recurring Deposit Scheme after one year after the applicants open their account.

Official Website

Visit the official website to read more.

Frequently Asked Questions

Q. How much amount can be invested under the Post Office Recurring Deposit Scheme?

To open a post office recurring deposit account, the minimum amount of investment is Rs. 10, and there is no limit on the maximum amount of investment. 

Q. Is tax exempted from the Post Office Recurring Deposit?

Yes, as per section 80C, tax is exempted from the Post Office Recurring Deposit, with the condition that the period of the deposit is five years.

Q. Can the investors pre-withdraw under the Post Office Recurring Deposit Scheme?

Yes, the premature withdrawal facility is available for the applicants of Post Office Recurring Deposit Account. But it is allowed after three years from the date of opening of the RD account. 

Q. Is it possible for a minor to open a recurring deposit account? 

For a minor who is above the age of 10 years, it is allowed to open a Recurring Deposit account. 

Q. Is there any facility of rebate provided under the Post Office Recurring Deposit Scheme?

The rebate facility is available for the investors who deposit the amount at least six months in advance. 


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WRITTEN BYVarsha Verma

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