• Hdfc Recurring Deposit
• Recurring Deposit
• Recurring Deposit Fidelity
• Recurring Deposit Definition
• Recurring Deposit Interest Rate

Recurring Deposit, or more commonly known as RD, is a financial investment option that works like an FD but provides fairly high flexibility. By recurring, it means something that occurs repeatedly over a course of time. Thus, investing in an RD means investors can opt to invest in instalments rather than depositing a lump sum amount. Recurring Deposit is one of the age old investment tools offered by banks. Even today, many investors prefer banks recurring deposits for investing their hard-earned money. Following are the benefits of investing in bank’s recurring deposits.

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Recurring Deposit Meaning

An RD (Recurring Deposit) is a special type of term deposit offered by the banks and post office which lets people deposit a specific amount every month into their RD account and earn returns at the rates offered for FDs. It is similar to initiating an FD of a specific amount in monthly installments. This scheme matures on a specific future date along with all the deposit amounts made every month. This scheme allows individuals an opportunity to build up their savings through regular monthly deposits of a fixed amount over a fixed tenure. The minimum tenure for an RD is generally 6 months and the maximum varies from institution to institution. RDs can be funded by standing mandates which are the orders by depositors to the bank to withdraw a specific amount from their current/saving account and credit to the recurring deposit account.

How RDs Work?

One can consider RDs as one of the simplest forms of investment. Let’s take an illustration for better understanding.

Let us assume that X wants to invest Rs 1,000 per month. He/she can either walk into any branch of a bank or post office or open an account online. If one opts to deposit Rs 1000 every month for a tenure of 12 months, then he/she will get a sum of Rs. 12,000 along with the accumulated interest at the maturity of the RD.

The depositors can plan to save for their future financial goals by using RDs. For instance, if one requires a lump-sum amount of Rs 1,00,000 after 1 year. Therefore, he/she can save around Rs. 8000 each month and make a deposit into the RD account. This way he/she will also earn interest on the amount.

WHY RD (Recurring Deposit)?

1. Higher rate of interest than savings account:

Interest rates here are identical to the interest rates offered in the fixed deposits. And generally, it is observed that RD fetches a higher return when compared to saving bank accounts.

2. Flexibility to invest on a monthly basis:

Unlike Fixed Deposits, investors can go for regular deposits. This is ideal for those who do not have a big amount of funds with them but have the capacity to save a decent amount of money regularly.

3. Guaranteed Returns:

RD is one of the safest investment options available. Since the market is not linked, a disturbance in the economy won’t affect the depositor’s returns. They will receive a profit on the rate promised to them at the time of initiating the RD. However, some of the RDs with lower-rated financial institutions & banks can be risky and therefore depositors must give attention to the credit ratings of institutions before making a deposit.

4. Short deposit tenure:

Hdfc Recurring Deposit

Investing in an RD gives one the option to go for a shorter duration. This leads to better liquidity and is ideal for those who want to target their short-term goals efficiently.

ELIGIBILITY

1. Any Individual
2. Any minor (above the age of 10 years) is eligible to initiate an RD, provided he submits the proof of name.
3. Any minor (of the age 10 years or less) can initiate an RD under the guardianship of a legal or natural guardian.
4. Any Company, Corporate, Govt Organisation, Proprietorship, or Commercial Organisation is eligible to open an RD account.

DOCUMENTS REQUIRED

1. Identity proof: PAN/Aadhar/License
2. Duly filled and signed application form of the bank
3. KYC documents (if needed)
4. Passport size photograph

KEY FEATURES

1. Deposit Term:

The minimum tenure starts at 6 months. One can choose a suitable tenure according to the convenience stretching up to 10 years.

2. Interest Rate:

The returns offered here are always more than the savings bank account. The interest rates are also identical to that of FDs.

3. Minimum Investment:

The minimum investment amount differs from bank to bank. One can open this account with an amount as mere as Rs. 10.

4. Withdrawal on maturity:

Withdrawal from RDs is allowed only after it attains maturity. However, if one chooses to withdraw the amount before the maturity tenure, it attracts a penalty.

5. Loan against deposit: The depositor is also offered an option to avail of a loan against the RD. Banks may allow up to 95% of the deposit amount as a loan against the deposit to be used as security/collateral.

6. Standing instructions for monthly deposits:

If one finds it inconvenient to deposit the amount periodically, banks also facilitate such payments as deductions from a linked account (current or saving) upon standing mandate or instructions.

TYPES OF RD

Apart from the regular RDs that one can invest in to earn returns and grow the corpus, RDs are also available in other types, ideal for different investors. Let’s have a look.

1. RD for senior citizens:

The scheme for senior citizens brings higher returns than regular accounts. The interest is compounded quarterly as per the applicable returns, thus facilitating senior citizens to withdraw a higher maturity corpus and meet their short-term funding needs efficiently in the absence of a regular source of income.

Generally, the additional returns offered by various institutions on the senior citizen RD scheme range between 0.25% and 0.75% p.a. above the regular rates.

2. RD for NRI/NRE:

RD schemes are one of the best investment options for Non-Resident Indians i.e. NRIs. Decent returns through investment can be generated with a small recurring deposit every month. As an NRI, one can invest in RDs either through an NRO or NRE RD account.

3. Flexi RD:

Recurring Deposit

These schemes allow an individual to invest a flexible amount as per one’s convenience. In this type of deposit, while the core investment amount is pre-decided, the depositor has an option to deposit amounts in multiples of the core principal amount.

RATES ACROSS TOP BANKS AND POST OFFICE

TAXATION OF RD

Just like an FD scheme, returns earned on an RD deposit are added to the annual income of the investor. This income goes to the ‘Income from Other Sources’ head and is fully taxable as per the applicable income tax slab rate.

No tax is levied if income earned from bank or post office deposits amounts to Rs. 40,000 or less. But if it goes beyond the Rs. 40,000 limit, banks charge 10% as Tax Deducted at Source i.e. TDS.

PREMATURE WITHDRAWAL OF RD

Recurring Deposit Fidelity

1. If the depositor withdraws the amount before it matures, the rate of return will be the one applicable to the period for which the deposit has remained with the institution. Generally, for premature withdrawals in RDs, a 1% penalty will also be levied.
2. However, some institutions would deduct a penalty of 1% to 2% from the applicable interest rate for the period during which the deposit remained in the bank in case of premature withdrawals.
3. Generally, the minimum lock-in period for a Recurring Deposit account is 3 months. If a premature withdrawal is made before this period, the depositor would earn zero interest and only the principal amount that was deposited would be refunded to him/her by the bank.
4. In addition to a penalty on interest, the depositor is not eligible for incentives offered by the bank on the RD.

More Information:

Understand the Difference Between FD and RD
RD vs SIP - Risk, Returns, Benefits, Tenure, Comparison, Which is Better Investment
Kisan Credit Card (KCC): Scheme Eligibility, Interest Rate, Loan Fee, Online Apply
Kisan Vikas Patra (KVP) Scheme - Benefits, Interest Rate, Types, Calculation
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What is Fixed Deposit: Meaning, Interest Rates, Benefits, Risk, Bank fd vs Corporate fd
PM Vaya Vandana Yojana (PMVVY): Scheme Eligibility, Interest Rate, Process to Apply
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Check Latest Post Office Fixed Deposit (FD) Interest Rate

Post Office Recurring Deposit (PORD) Scheme is a systematic savings plan, where you can deposit your money for a definite time period and earn interest on that. You need to invest an equal amount of sum for a minimum period of 60 months. 5 years post office recurring deposit scheme allows you to earn fixed yet guaranteed interest on your investment.

Though banks also offer recurring deposit accounts, however, Post Office RD is a more popular saving tool in rural and suburban areas. The interest is compounded quarterly in a PORD account. As a result, you get a higher interest rate compared to many other small savings schemes.

In this article I will discuss about everything about Post Office RD like:

• Post Office RD Interest Rate
• Where Can You Open an Account
• How to Open an RD in Post Office
• Important Features
• Online Payment Rules
• Minimum and Maximum Deposit Limit

Post Office RD Interest Rate 2021

Post Office 5 year recurring deposit account (PORD) offers an interest rate of 7.3% per annum. The interest is compounded quarterly, consequently, giving a rate of 8.4% compounding quarterly. As a result, you can rest assured that the money is multiplied at the time of maturity.

The interest rates are fixed periodically. Therefore, make sure to check the current interest rate of post office recurring deposit, before opening an account.

Where Can You Open an Account?

You can open the account in any of your nearest/ preferred post office.

Documents Required for Post Office Recurring Deposit

The needed documents for opening an account are:

• An account opening form from your nearest post office
• Two passport size photographs
• Address and identity proof such as the Aadhaar card, passport, driving license, voter ID card, ration card, PAN card, or declaration in Form 60 or 61 as per the Income Tax Act, 1961

How to Open an RD in Post Office?

First of all, collect the documents mentioned above.

Also, carry the original identity proof for verification at the time of account opening. Fill up the form carefully and provide nominee details. Finally, get a witness signature and complete the procedure to get started.

Post Office Recurring Deposit Features

• An account can be opened by cash only.
• One account can be opened in one post office.
• To keep the account active, it is necessary to have at least one transaction (either deposit or withdrawal) in three financial years.
• You have the option to convert a Single account into a Joint and Vice Versa.
• Two or three adults can open a Joint account together.
• Cheque facility can be taken in an existing account also.
• Nomination facility is available at the time of opening and also after opening of the account.
• You can transfer your RD account from one post office to another.
• The account can be opened in the name of a minor. Also, a minor of 10 years and above can open and operate the account.
• Minors need to apply for conversion of the account in his/ her name after attaining a majority.
• Customers are allowed to deposit and withdraw through any electronic mode in CBS Post offices.

Also Check: Post Office Monthly Income Scheme (MIS): Interest Rates 2021, Maturity Calculator, Premature Withdrawal Rules

Recurring Deposit Definition

Post Office Recurring Deposit Tax Benefit

Recurring Deposit schemes are not eligible for tax exemption.

Post Office Recurring Deposit (RD) Online Payment

Post office RD online payment is not yet possible except through Electronic Clearing Service (ECS). Hence, you can use ECS to pay the amount. Furthermore, if you have an agent, he or she can use the post office agent portal and do the online payment for you.

Minimum and Maximum Deposit in Post Office RD Account

The minimum amount to deposit in Post Office RD is Rs.10 and it should be in multiples of Rs.5, afterward.

No such maximum limit specified, as of now.

FAQs on Post Office RD

Can I open post office recurring deposit online?

No, this facility is not yet available. Therefore, you need to open an account in the post office itself.

What is the maturity value of post office RD?

The maturity period is of 5 years where you need to deposit 60 installments of equal monthly sums. You can use the post office recurring deposit maturity calculator to calculate the maturity amount.

What is the tenure of post office recurring deposit premature closure?

Premature closure is permissible after expiry of three years. Furthermore, the interest rate applicable to post office savings account shall be payable in this case.

Is post office RD premature withdrawal possible?

Premature withdrawal of recurring deposits in the post office is possible after 3 years. Also, one withdrawal of 50% of the balance is allowed after one year.

Recurring Deposit Interest Rate

What are the late payment fees?

Monthly deposit amounts can be credited on any day of the month. Due to any reason, if the monthly installment is not credited for any particular month, then it will be considered as a default. The amounts for that month can be credited with a penalty of 0.20 paise for Rs. 10/- (for each month of default). And, a maximum of 4 defaults is allowed.

Hope you will find the article useful. Please feel free to share your queries and experiences, if any. Also, don’t forget to share this article with your friends who might want to open an account under the Post Office Recurring Deposit scheme.