Post Office Savings Schemes In India - Introduction of Post Office Recurring Deposit Account (RDA)


The main financial services offered by the Department of Posts are the Post Office Savings Bank. It is the largest and oldest banking service institution in the country. The Department of Posts operates the Post Office Savings Scheme function on behalf of the Ministry of Finance, Government of India. Under this scheme, more than 20.50 crores savings account are operated. These accounts are operated through more than 1,54,000 post offices across the country.

The Post offices provide a number of savings schemes like the Savings Account Schemes, Recurring Deposit Schemes, Time Deposit Schemes, Public Provident Fund Schemes, Monthly Income Schemes, National Savings Certificates, Kisan Vikas Patras, and Senior Citizens Savings Scheme. A brief of the various schemes is as follows:

Scheme Interest Rates Tenure Investment Denominations and limits Salient Features Tax rebate
Post Office Savings Account 3.5% p.a. On individual and joint account No specific or fix tenure Min: Rs. 50 Max: Rs. 1 lakh for individual and 2 lakhs for joint account Cheque facility available Interest is tax-free u/s 80L
5-Year Post Office Recurring Deposit Account 7.5% compounded quarterly 5 years. Can be renewed for another 5 years Min: Rs. 10 per month or multiples of Rs. 5 Max: No limit One withdrawal up to 50% of the balance is allowed after one year. Full maturity value allowed on R.D. 6 & 12 months advance deposits earn rebate. No tax rebate
Post Office Time Deposit Account 6.25% 1 year Min: Rs. 200 and its multiple thereof Max: No limit Long-term accounts could be closed after 1 year for discounted interest. Accounts could be closed after 6 months but before a year for no interest. Interest is calculated quarterly but payable yearly. Investment qualifies for deduction u/s 80C. Interest is tax-free u/s 80L
6.50% 2 years
7.25% 3 years
7.50% 5 years
Post Office Monthly Income Account 8% p.a. 6 years Min: Rs. 1500 per month or multiples of it.Max: Rs. 4.5 lakhs for individual account and Rs. 9 lakhs for joint account Account if closed after 1 year but before 3 years will suffer a deduction of 2% of the deposit. Account if closed after 3 years will suffer a deduction of 1% of the deposit. On maturity, bonus of 5% on principal amount is admissible Interest is tax-free u/s 80L
15-year Public Provident Fund Account 8% p.a. compounded yearly 15 years tenure Min: Rs. 500 in 1 year Max: Rs. 70000 in 1 year Deposits can be made in lump-sum or 12 installments Withdrawal can be made every year after the 7th financial year. From the 3rd financial year, loan can be availed against PPF. No attachment under court decree order. Investment qualifies for deduction u/s 80C. Interest is tax-free u/s 80L
Kisan Vikas Patra 8.4% compounded yearly. Money doubles in 8 years and 7 months --- No limits. Investment denominations available are of Rs. 100, Rs. 500, Rs. 1000, Rs. 5000, Rs. 10,000, in all Post Offices and Rs. 50,000 in all Head Post Offices. A single holder certificate can be purchased by an adult. A certificate can also be purchased jointly by two adults. No tax benefits
National Savings Certificate (VIII issue) 8% p.a. compounded half-yearly but payable after maturity 6 years Min: Rs. 100. Also available in denominations of Rs. 100/-, 500/-, 1000/-, 5000 & Rs. 10,000/-. Max: no limit A single holder certificate can be purchased by an adult. Investment as well as the interest deemed to be re-invested qualifies for deduction u/s 80C.
Senior Citizens Savings Scheme 9% p.a. 5 years Only 1 deposit allowed in multiple of Rs. 1000. Max is Rs. 15 lakhs Age should be above 60 years or 55 years above if retired under superannuation. Account if closed after 1 year will suffer a deduction of 1.5% interest and after 2 years will suffer a deduction of 1% interest. TDS is made on interest if it exceeds Rs. 10000 p.a. Investment qualifies for deduction u/s 80C.

Will talk about
Post Office Recurring Deposit Account (RDA)

A Post-Office Recurring Deposit Account (RDA) is a banking service offered by Department of post, Government of India at all post office counters in the country. The scheme is meant for investors who want to deposit a fixed amount every month, in order to get a lump sum after five years. The scheme, a systematic way for long term savings, is one of the best investment option for the low income groups.




Features:
  • The minimum investment in a post-office RDA is Rs 10 and then in multiples of Rs. 5/- for a period of 5 years. There is no prescribed upper limit on your investment.
  • The deposit shall be paid as monthly installments and each subsequent monthly installment shall be made before the end of the calendar month and shall be equal to the first deposit. In case of default in payment, a default fee is chargeable for delayed deposit at 0.20 Paise per month of delay, for Rs.10 Denomination. After more than four defaults, the account shall be treated as discontinued in case the account is not revived within two months from the fifth default.
  • For Advance deposits for 6 months or 12 months, a rebate is allowed at the prescribed rate (For Rs 10 denomination:- Rs.1/- for 6 advance deposits, Rs.4/- for 12 advance deposits.
  • One withdrawal is allowed after one year of opening a post-office RDA on meeting certain conditions. You can withdraw up to half the balance lying to your credit at an interest charged at 15%. The withdrawal or the loan may be repaid in one lump or in equal monthly installments.
  • Premature closure is allowed on completion of three years from the date of opening and in such case, interest is payable as per the rate applicable for the Post Office Savings Bank Account.
  • After maturity of the account, it can be continued for a further period of 5 years with or without further deposits. During this extended period, the account can be closed at any time.
Returns:
The post-office recurring deposits offers a fixed rate of interest, currently at 7.5 per cent per anum compounded quarterly.



Monthly Investment Total Investment(60months) Money returned on Maturity (after 60 months)
10 600 728.90
20 1,200 1457.80
50 3,000 3644.50
100 6,000 7289.00
500 30,000 36445.00
1000 60,000 72890.00
1375 82,500 100224.00
5000 3,00,000 364450.00

Advantages
:
The post office offers a fixed rate of interest unlike banks which constantly change their recurring deposit interest rates depending on their demand supply position. As the post office is a department of the government of India, it is a safe investment. The principal amount in the Recurring Deposit Account is assured. Moreover Interest earned on this account is exempted from tax as per Section 80L of Income Tax Act.



How to Start Post office RDA:
A post-office RDA can be opened at any post office in the country by filling up the appropriate forms. The account can be opened by an individual adult as a single person account, two adults in a joint mode, or by a guardian on behalf of the minor who has attained the age of 10 years in his own name. A pass book is issued at the time of opening the account. If there is a loss, theft or the passbook is mutilated, a duplicate is issued on a charge. The deposit can be made personally at the particular post office every month or can be made through an appointed agent, who would collect the money from you and enter the same in your passbook.
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