If you’ve been searching for a safe and reliable savings option, the Post Office Recurring Deposit (RD) Scheme might just be your perfect match. With a monthly deposit of just ₹4040, you can build a sizeable corpus over 5 years while earning guaranteed returns backed by the Government of India.
In this article, we will break down how much return you can expect by investing ₹4040 per month in the Post Office RD Scheme, explain how the scheme works, and guide you through the benefits, calculations, and application process.
Post Office RD scheme
| Feature | Details |
|---|---|
| Monthly Investment | ₹4040 |
| Tenure | 5 years (60 months) |
| Interest Rate | 6.7% p.a. (compounded quarterly) |
| Maturity Amount | Approx. ₹2,83,000 |
| Total Interest Earned | Approx. ₹40,600 |
| Risk Level | Very Low (Backed by Govt. of India) |
| Official Website | India Post |
If you’re looking for a low-risk, steady-return investment, the Post Office RD Scheme is a solid choice. With just ₹4040 per month, you can accumulate over ₹2.8 lakh in 5 years. The scheme’s simplicity, safety, and guaranteed interest make it perfect for all types of savers.
Understanding the Post Office RD Scheme
The Post Office RD scheme is a savings plan where you deposit a fixed amount every month for a fixed period of 5 years. It offers an interest rate of 6.7% per annum, compounded quarterly.
This means your money grows every three months, making it a great option for disciplined savers who want safe and steady returns.
Key Features:
- Minimum deposit: ₹100 per month
- No maximum limit (in multiples of ₹10)
- Interest is compounded every quarter
- Premature closure allowed after 3 years
- Can be opened individually or jointly
- Can be transferred between post offices
see also: Fixed Deposits: Get Up to 8% Interest on FDs of These Banks
How Much Will You Get by Depositing ₹4040 Monthly?
Let’s break it down with real numbers:
- Monthly Deposit: ₹4040
- Tenure: 5 years = 60 months
- Total Investment: ₹4040 x 60 = ₹2,42,400
- Interest Rate: 6.7% p.a. compounded quarterly
Using the standard RD maturity formula or India Post’s calculator, the maturity amount after 5 years will be approximately ₹2,83,000.
So, your net gain (interest earned) = ₹2,83,000 – ₹2,42,400 = ₹40,600
This return is risk-free and tax-efficient, especially for small savers.
Why Choose the Post Office RD Scheme?
1. 100% Capital Protection
Your money is safe, as this scheme is backed by the Government of India.
2. Guaranteed Returns
Unlike mutual funds or stocks, the RD scheme offers fixed interest that doesn’t change during the tenure.
3. No Market Risk
You earn consistent returns regardless of market ups and downs.
4. Flexibility
You can open more than one RD account and even set up standing instructions.
5. Premature Withdrawal Option
In case of an emergency, you can close your RD account after 3 years.
How to Open a Post Office RD Account
Step 1: Visit Your Nearest Post Office
Head to any post office and ask for the RD Account Opening Form (Form A).
Step 2: Submit Required Documents
- Aadhar card or any valid ID proof
- Passport-size photo
- Initial deposit amount (e.g., ₹4040 for the first month)
Step 3: Choose Payment Mode
You can pay via:
- Cash
- Cheque
- Standing instruction from your Post Office savings account
Step 4: Get Your Passbook
Once processed, you’ll receive an RD passbook showing your account number, deposit details, and maturity date.
Tip: You can also open a Post Office RD online via the India Post Internet Banking portal if you already have a savings account with them.
How RD Interest is Calculated
The RD interest is compounded every quarter (i.e., every 3 months). The formula used is:
M=R×(1+i)n−11−(1+i)−1/3M = R \times \frac{(1 + i)^n – 1}{1 – (1 + i)^{-1/3}}
Where:
- M = Maturity value
- R = Monthly deposit
- i = Interest rate per quarter
- n = Number of quarters
This compound interest formula ensures your money earns interest on interest, making it more powerful than simple savings.
What Happens on Maturity?
Once your RD matures after 5 years:
- You can withdraw the full amount (principal + interest)
- Or reinvest in another RD, PPF, or Senior Citizen Scheme
- No TDS is deducted, but interest is taxable as per your slab
Who Should Invest in Post Office RD?
This scheme is ideal for:
- Salaried individuals wanting safe savings
- Parents saving for kids’ education
- Retired persons looking for capital protection
- First-time investors seeking disciplined saving habits
Tax Implications
- No tax benefits under Section 80C
- Interest is fully taxable under “Income from Other Sources”
- No TDS is deducted at source
To reduce tax liability, consider investing in PPF or ELSS alongside your RD.
see also: Post Office Great Scheme: How to Get ₹10 Lakh from ₹5000 Per Month FD?
Post Office RD scheme FAQs
Q1. Is the interest rate fixed for 5 years?
Yes, once you open your RD, the interest rate is locked for the full tenure.
Q2. Can I change my monthly deposit amount?
No. You must deposit the same amount every month.
Q3. What happens if I miss a payment?
A default fee is charged. After 4 consecutive defaults, the account is discontinued.
Q4. Can NRIs open a Post Office RD?
No, only resident Indians are eligible.
Q5. Is online deposit possible every month?
Yes, through India Post Internet Banking, if linked to your savings account.
