RD Interest Rates: Indian families have a very good habit of saving money for the future by making small savings. To support this small savings, banks and post offices run a popular scheme Recurring Deposit (RD).
In the October-December quarter, the Post Office has increased the interest rate on RD to 6.7 percent. You can get information about where it would be better for you to invest your money in the bank or post office and which of these places can provide better interest and facilities.
What is recurring deposit?
RD is a kind of systematic saving plan, where you save every month and keep depositing your money for a few years. You get this money collected along with interest after the completion of the stipulated period of RD. Therefore this scheme is very much liked in middle class families.
How are RDs of bank and post office different?
The biggest difference between RD of bank and post office is the time period. While banks offer you to choose the tenure from 6 months to five years, the post office has RD only for five years.
What is the difference in interest rates?
If we look at the interest rates on RD, only a few private banks are ahead of the post office. Most banks give less interest on RD than post offices. Only HDFC Bank, ICICI Bank, Axis Bank, Canara Bank and Bank of Baroda (BOB) are offering higher interest. Their interest rates range from 6.75 percent to 7 percent.
Who can open RD account
To open an RD account, you must be a citizen of India. Even if your age is less than 10 years, this account can be opened with your guardian. RD can also be opened as a joint account.
With how much money can you start investing?
You can open this account in the post office with a minimum of Rs 100 per month. Maximum you can put any amount of money. Since RD account is backed by the Government of India, there is no risk in this scheme.
Banks have different schemes
However, the RD scheme of the bank is different from that of the post office. In this also you can start with Rs 100 per month. But, the thing to note is that your total deposit and interest on it should not exceed Rs 5 lakh. Only amounts up to Rs 5 lakh are covered under the deposit insurance program.
How to withdraw money before time is up
You can close RD account in post office only after completion of three years. However, in such a situation, you will get only the interest on the savings account. Apart from this, you can also take loan on RD account, on which the amount can be repaid in installments by paying 2% more interest. Since there is no lock-in period in most banks, it is quite easy to withdraw money before time. However, you may have to pay a fine.
Income tax on RD
You do not get tax benefits on RD account. Apart from this, the interest received on maturity is considered as income, hence you will have to pay TDS.
Where is it better to invest money, bank or post office?
Your RD account is safe both in bank and post office. However, compared to banks, the post office gives you more guarantee that your money is safe. But if we look at the simple rules for closing the account, the banks win. Therefore, you can take a decision keeping your needs in mind.
