If you’re looking for a low-risk, government-backed savings plan in India, the Post Office Recurring Deposit (RD) scheme might be the perfect choice. With just ₹500 or ₹1,000 invested every month, you can build a lump sum of over ₹71,000 in 5 years thanks to compound interest. In this article, we’ll explain how the scheme works, show the latest interest rates, and walk you through exact returns for small investors.
Post Office RD Scheme 2025
| Feature | Details |
|---|---|
| Scheme Name | Post Office Recurring Deposit (RD) |
| Monthly Deposit Options | ₹500 and ₹1,000 (you can choose more) |
| Tenure | 5 years (60 monthly deposits) |
| Interest Rate (2025) | 6.7% per annum, compounded quarterly |
| Maturity Amount for ₹500/month | ₹35,683 |
| Maturity Amount for ₹1,000/month | ₹71,366 |
| Loan Facility | Up to 50% of balance after 12 months |
| Minimum Investment | ₹100 per month |
| Taxation | Interest taxable, no TDS |
| Official Link | India Post RD |
The Post Office RD scheme is a reliable and disciplined way to build wealth over time. With just ₹500 or ₹1,000 per month, you can accumulate ₹35,000–₹71,000 in 5 years with guaranteed returns and zero risk. The scheme is especially useful for those new to savings or anyone looking for an easy, government-backed option to park their money safely.
What Is the Post Office RD Scheme?
The Post Office Recurring Deposit scheme is a savings plan offered by India Post where you deposit a fixed amount every month for 5 years and earn interest compounded quarterly. It’s ideal for individuals who prefer small, consistent savings without taking financial risks.
This government-backed scheme ensures the safety of your investment and offers better interest rates compared to many bank RDs. With a minimum monthly deposit of ₹100 and no upper limit, it offers flexibility for investors of all backgrounds.
see also: Post Office MIS 2025: Invest ₹9 Lakh and Earn ₹18,350 Monthly
Post Office RD Interest Rate 2025
As of April–June 2025, the Post Office RD interest rate is 6.7% per annum, compounded quarterly. This rate is fixed by the Ministry of Finance and is reviewed every quarter.
To break it down:
- Compounding frequency: Every 3 months
- Annual interest: 6.7%
- Effective return over 5 years is higher due to compounding
You can check the latest rates anytime at India Post’s official RD page.
Maturity Calculation: ₹500 vs ₹1,000 Monthly for 5 Years
Scenario 1: ₹500/month for 5 Years
- Total investment: ₹500 × 60 months = ₹30,000
- Interest earned: ₹5,683
- Maturity amount: ₹35,683
Scenario 2: ₹1,000/month for 5 Years
- Total investment: ₹1,000 × 60 months = ₹60,000
- Interest earned: ₹11,366
- Maturity amount: ₹71,366
Note: These amounts are based on 6.7% annual interest, compounded quarterly. Slight changes in the interest rate could affect returns.
You can calculate your exact maturity using this Post Office RD Calculator.
How Is Interest Calculated in Post Office RD?
The formula used is:
M = R × [(1 + i)^n – 1] / [1 – (1 + i)^(-1/3)]
Where:
- M = Maturity amount
- R = Monthly deposit
- i = Interest rate per quarter (6.7% ÷ 4 = 1.675% or 0.01675)
- n = Total quarters (5 years × 4 = 20)
This formula ensures that interest is compounded quarterly, giving higher returns than simple interest methods.
Features and Benefits of Post Office RD
1. Safety and Government Backing
Your money is backed by the Government of India, making it one of the safest savings options available.
2. Loan Facility
After 12 monthly deposits, you can take a loan up to 50% of your balance. The interest on the loan will be 2% more than the RD rate.
3. Advance Deposit Facility
Yes Bank Scheme: सिर्फ 12 महीने में ₹4 लाख पर कमाएं ₹35,000 का मुनाफा — मिल रहा है 8.25% तक ब्याज
You can deposit advance amounts for 6 months or more and get a rebate (discount). This is useful if you have a lump sum.
4. Easy Access and Portability
You can open the RD account at any post office, transfer it anywhere in India, and even operate it jointly or on behalf of a minor.
5. Nomination and Minor Accounts
You can nominate a family member, and also open RD accounts for children above 10 years.
Who Should Invest in a Post Office RD?
- Salaried Employees: Ideal for monthly disciplined saving.
- Homemakers: Helps build an emergency fund gradually.
- Students: Start saving pocket money to build financial habits.
- Retirees: Useful for safely parking small amounts monthly.
Tax Implications
- Interest earned is taxable under the investor’s income slab.
- However, no TDS (Tax Deducted at Source) is applicable, unlike bank FDs.
- You can declare the interest in your Income Tax Return (ITR) every year.
Tip: If your total income is below the taxable limit, you don’t need to worry about paying tax on the interest.
How to Open a Post Office RD Account
Steps to Open an RD Account:
- Visit your nearest India Post Office.
- Fill the RD account opening form (available at the counter or online).
- Submit KYC documents:
- Aadhaar Card
- PAN Card
- Passport-size photo
- Deposit the initial amount (minimum ₹100).
- You can also link the account with your India Post Payment Bank (IPPB) mobile app for online payments.
Online RD opening is also available via IPPB for account holders.
Best Practices for Maximizing Returns
- Don’t miss deposits: If you miss 4 consecutive payments, your account may be discontinued.
- Pay in advance: Get rebates and avoid penalties.
- Use auto-debit from IPPB or linked bank to stay regular.
- Reinvest on maturity: Use the maturity amount to open a new RD or other small savings scheme.
see also: Many Banks Including SBI, PNB, BOI Announce FD Interest Rate Cuts in April 2025
Post Office RD Scheme 2025 FAQs
Q1. What happens if I miss a monthly RD deposit?
If you miss a deposit, a penalty of ₹1 for every ₹100 deposit is charged per month. If you miss 4 consecutive payments, the account may be discontinued.
Q2. Can I withdraw the RD before 5 years?
Premature closure is allowed after 3 years, but you will earn the Post Office Savings Account interest rate, which is lower than RD interest.
Q3. Can NRIs open a Post Office RD account?
No, Non-Resident Indians (NRIs) are not allowed to open Post Office RD accounts.
Q4. Is TDS deducted on Post Office RD interest?
No TDS is deducted, but the interest is taxable under the investor’s income tax slab.
Q5. Can I increase my monthly deposit later?
No. Once you choose your deposit amount during account opening, it remains fixed for the entire tenure.
