Post Office RD Scheme: ₹10,000 monthly deposit will create a guaranteed fund of ₹7 lakh in 5 years

Post Office Scheme: If you are looking for a safe and reliable investment option by saving small amounts every month, then the 5-year Recurring Deposit (RD) scheme of the Post Office can be a better option for you.

In this scheme, the investor gets 6.7 percent annual interest, which is compounded on a quarterly basis. The account can be started with a minimum deposit of ₹ 100 every month and there is no maximum investment limit in it. With government guarantee and fixed returns, this scheme is becoming popular among small investors.

What is Post Office RD?

Post Office’s 5-year Recurring Deposit – RD scheme is a safe investment option, in which you can make a good saving by depositing a small amount every month. This scheme is considered especially beneficial for small investors.

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Interest rates and deposit amounts

• Interest Rate : 6.7% per annum (quarterly compounding) – Applicable from 1st January 2024
• Minimum Monthly Deposit : ₹100 (in multiples of ₹10)
• Maximum Limit : No Upper Limit

Who can open an account?

• Any adult person
• Joint account (maximum 3 adults)
• Guardian for a minor or mentally incompetent person
• Child of age 10 years and above in his/her own name – One person can also open multiple accounts

How is interest calculated

A special formula is used to calculate compound interest on Post Office Recurring Deposit (RD).

Formula to calculate interest on RD

M = R × {(1 + i)ⁿ – 1} / (1 – (1 + i)^(-1/3))

In this formula:

M = Total amount received on maturity

R = Amount to be deposited every month (monthly installment)

n = Total deposit period (in months)

i = Interest rate / 400 (since interest is compounded quarterly, 12 months is divided into 4 quarters)

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How much fund will you get in 5 years from ₹10,000 monthly deposit? See calculation

If a person deposits ₹10,000 every month in the Post Office RD scheme, then the total deposit amount in 5 years i.e. 60 months will be ₹6 lakh. With an annual interest rate of 6.7% (on a quarterly compounding basis), this amount will fetch an interest of around ₹1,13,659. That is, a total amount of ₹7,13,659 will be received on maturity.

To understand this calculation, see below:

• Monthly Deposit : ₹10,000
• Total Deposit Tenure : 5 Years (60 Months)
• Total Investment : ₹6,00,000
• Interest received : ₹1,13,659
• Maturity Amount : ₹7,13,659

Rules for depositing money

• Account can be opened by cash or cheque
• If the account is opened between 1st to 15th, then installment has to be deposited by 15th of every month
• If the account is opened between 16th and end of the month, then deposit has to be made by last working day of every month

What happens in case of default?

• A penalty of ₹1 will be charged for every defaulted month for every ₹100 installment
• If installments are not deposited for 4 consecutive months, the account will be discontinued
• The account can be reactivated within 2 months
• If the defaults are less than 4, the account can be kept active for an extended period of time and outstanding installments can be deposited

Facility to deposit advance in one go

• If the account is not closed, you can pay installments for up to 5 years at a time
• On monthly deposit of ₹100
  • ₹10 discount on 6 months advance deposit
  • ₹40 discount on 12 month deposits
• This deposit can be made at the time of opening the account or at any time thereafter
  

Loan facility

• If 12 installments have been deposited in the account and the account is regular, then
  • You can avail loan up to 50% of the total deposit amount
  • Interest on loan: RD interest rate + 2%
  • The loan can be repaid in lump sum or in monthly installments
  • If the loan is not repaid on time, the loan amount and interest will be deducted from the maturity amount

Rules for closing the account before time

• The account can be closed after completion of 3 years
• But if the account is closed before maturity, only the Post Office Savings Account interest rate will be applicable
• Account cannot be closed before the advance deposit period

Facility of maturity and extension

• The account is for a tenure of 5 years (60 months)
• It can be extended for another 5 years
• Account can be closed any time during the extension
  • Interest at RD rate for full year
  • Interest at savings account rate for incomplete year
• After maturity, the account can be maintained for 5 years without depositing any amount
  

On the death of the account holder

• The nominee or legal heir can receive the amount by submitting the claim form at the post office
• They can also continue the account for the original period if they wish

Why is this plan beneficial for you?

If you want to save ₹100 or more every month and earn safe returns, then this scheme is ideal for you. This is a government scheme in which the interest is fixed, there is loan facility and the risk is very low.

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