The Post Office Recurring Deposit (RD) scheme has long been a favorite among Indian investors seeking a safe and steady savings option. But did you know that after Holi, you can earn close to ₹2 lakh by simply depositing ₹2,800 monthly in this scheme? Not only that, but it also offers attractive tax benefits under Section 80C of the Income Tax Act, making it a smart choice for both salaried individuals and self-employed professionals.
In this article, we’ll walk you through how this scheme works, how much you can earn, the tax advantages, and why it is considered a reliable government-backed savings tool. Whether you are a beginner or an experienced investor, you’ll find practical insights and step-by-step guidance here.
Tax Benefits in Post Office RD
| Feature | Details |
|---|---|
| Scheme Name | Post Office Recurring Deposit (RD) |
| Interest Rate | 6.70% per annum (compounded quarterly) |
| Monthly Deposit | ₹2,800 |
| Tenure | 5 Years |
| Maturity Amount | Approx. ₹1,97,930 |
| Tax Benefits | Deduction under Section 80C (up to ₹1.5 lakh per year) |
| Interest Taxation | Interest is taxable as per applicable income tax slab |
| Safety | 100% Government-backed |
| Official Website | India Post |
If you’re looking for a low-risk, government-backed investment option with decent returns and tax benefits, the Post Office Recurring Deposit (RD) is an ideal choice. By investing just ₹2,800 per month, you can accumulate close to ₹2 lakh in 5 years. Moreover, you get to save taxes under Section 80C, making it a win-win for both beginners and seasoned investors.
What is the Post Office Recurring Deposit (RD) Scheme?
The Post Office RD scheme is a small savings plan offered by India Post. It allows you to deposit a fixed amount every month, making it a disciplined and low-risk way to build savings.
This scheme is backed by the Government of India, meaning your money is completely secure, unlike some market-linked products. Plus, it’s accessible to almost every Indian, even in rural areas.
see also: HDFC and PNB Bank Launch Special Fixed Deposit Schemes to Delight Customers
How Much Can You Earn: ₹2,800 Monthly Deposit Example
Let’s break down the numbers in simple terms.
Example Calculation:
- Monthly Deposit: ₹2,800
- Tenure: 5 years (60 months)
- Interest Rate: 6.70% per annum (compounded quarterly)
Maturity Amount Calculation Formula: M=R×{(1+i)n−11−(1+i)−1/3}M = R \times \left\{ \frac{(1 + i)^n – 1}{1 – (1 + i)^{-1/3}} \right\}
Where:
- M = Maturity amount
- R = Monthly deposit (₹2,800)
- i = Quarterly interest rate = 6.70% ÷ 400 = 0.01675
- n = Number of quarters = 20 (5 years × 4 quarters)
Result:
Maturity Amount ≈ ₹1,97,930
That’s almost ₹2 lakh by simply investing ₹2,800 monthly for 5 years! Perfect for long-term financial goals like a child’s education, wedding, or building an emergency fund.
Tax Benefits Under Section 80C: How to Save More!
One of the most appealing features of the Post Office RD scheme is the tax benefits. Here’s how:
Section 80C Deduction:
You can claim a deduction of up to ₹1.5 lakh annually on your total investments, including RD deposits, under Section 80C of the Income Tax Act.
Interest Taxation:
While the principal qualifies for tax benefits, remember that the interest earned is taxable. It will be added to your income and taxed as per your slab.
Pro Tip: Combine RD with other Section 80C instruments like PPF, ELSS, NSC, or Tax-saving FDs to maximize your tax savings.
Step-by-Step Guide: How to Open a Post Office RD Account
Opening an RD account is super simple. Here’s how:
Step 1: Visit Your Nearest Post Office
Carry the following documents:
- Aadhaar Card
- PAN Card
- Passport-size photo
- Address proof (utility bill, etc.)
Step 2: Fill the Application Form
Request and complete the RD account opening form.
Step 3: Make Your First Deposit
Deposit your first installment (₹100 minimum; ₹2,800 as per our example) in cash, cheque, or via electronic transfer.
Step 4: Choose Nominee
Nomination facility is available. Nominate a beneficiary at the time of opening.
Step 5: Start Depositing Monthly
Continue monthly deposits for 5 years either manually or through standing instructions (auto-debit).
Why Choose Post Office RD Over Other Schemes?
| Feature | Post Office RD | Bank RD | Mutual Funds |
|---|---|---|---|
| Safety | 100% Govt-Backed | Depends on bank health | Market-linked (Risky) |
| Interest Rate | 6.70% p.a. | Varies (6% – 7%) | Market-dependent |
| Tax Benefits | Section 80C | Usually None | ELSS (tax-saving) |
| Accessibility | Rural & Urban | Mostly urban | Requires Demat/Mutual Fund account |
| Discipline | Fixed monthly deposit | Flexible | Highly flexible but volatile |
If you are a risk-averse investor or looking to diversify your portfolio with guaranteed returns, Post Office RD is a rock-solid option.
Professional Tip: Maximize Returns Smartly!
- Start Early: The earlier you start, the better. Even small monthly amounts can grow big over time.
- Combine with Other Tax-Saving Options: Utilize PPF, NPS, or ELSS along with RD to optimize both savings and tax benefits.
- Use Auto-Debit Feature: Avoid missed payments, which could attract penalties and reduce returns.
see also: Are You Planning to Get a Credit Card for the First Time?
Tax Benefits in Post Office RD Scheme FAQs
1. What is the minimum deposit required for a Post Office RD account?
You can start with as low as ₹100 per month, but there is no maximum limit.
2. Is premature withdrawal allowed in Post Office RD?
Yes, but only after completing 3 years. Premature withdrawal attracts a penalty and reduced interest rate.
3. Is TDS applicable on Post Office RD interest?
Unlike banks, TDS is not deducted at source. However, you must declare the interest earned while filing your ITR.
4. Can NRIs open a Post Office RD account?
No, only resident Indians are eligible to open RD accounts at Post Offices.
5. Can I extend the RD account after maturity?
Yes, you can extend it for another 5 years, continuing with the same terms.
