National Savings RD Account – Complete Guide
The National Savings RD Account is a simple yet powerful tool for individuals looking to build a savings corpus with minimal risk. Backed by the Government, it offers steady returns and is an excellent option for salaried individuals, homemakers, and small business owners.
What is a National Savings RD Account?
A Recurring Deposit (RD) Account with National Savings is a small savings scheme initiated by the Indian Government through post offices or public sector banks. It allows individuals to invest a fixed amount every month and earn a guaranteed return with compound interest. It's ideal for disciplined saving and safe wealth accumulation.
Key Features of the National Savings RD Account
- Deposit Amount: Minimum ₹100 per month; multiples of ₹10. No maximum limit.
- Tenure: Fixed for 5 years (60 months).
- Interest Rate: As of now, the interest rate is 6.7% p.a., compounded quarterly.
- Compounding: Quarterly compounding ensures better returns.
- Premature Closure: Allowed after 3 years (interest adjusted).
- Loan Facility: Up to 50% of the balance after 12 monthly deposits.
- Nomination Facility: Available at the time of account opening or anytime later.
- Taxation: Interest is taxable; TDS not deducted automatically.
Benefits of Opening a National Savings RD Account
- Backed by the Government of India – zero risk
- Helps in building a disciplined savings habit
- Ideal for conservative investors
- Can be opened individually or jointly
- Suitable for short- to medium-term financial goals
- Flexible deposit options for rural and urban investors alike
Eligibility Criteria
- Any Indian resident individual
- Minors above 10 years with their own name
- Guardians on behalf of minors
- Joint accounts (up to 3 adults)
Documents Required
- Aadhar card and PAN card
- Recent passport-size photograph
- Address and ID proof (as per KYC norms)
- Filled account opening form
- Initial deposit amount
How to Open a National Savings RD Account
You can open a National Savings RD Account at:
- Post Offices (under the Post Office Recurring Deposit Scheme)
- Designated Public Sector Banks
Steps:
- Visit the nearest post office or bank branch.
- Fill in the RD account opening form.
- Submit KYC documents and passport-sized photo.
- Deposit the first installment in cash or by cheque.
- Collect your passbook (physical or digital).
Interest Rate and Maturity Value Calculation
The RD interest is compounded quarterly, meaning your returns grow faster than simple interest schemes. Here's a quick example:
- Monthly deposit: ₹1,000
- Tenure: 5 years
- Interest Rate: 6.7% compounded quarterly
- Maturity Value: ~₹70,000+
(Exact value may vary based on compounding cycles)
What Happens on Premature Closure?
- After 3 Years: Allowed with adjusted interest.
- Before 3 Years: No interest paid.
- Default Penalty: ₹1 for every ₹100 deposit missed.
Loan Against RD
After completing 12 monthly deposits, you can avail a loan up to 50% of the balance. The loan must be repaid before maturity or it will be adjusted during maturity settlement.
FAQs on National Savings RD Account
- What is the current interest rate for National Savings RD Account?
As of now, the interest rate is 6.7% p.a., compounded quarterly. It may be revised quarterly by the Government of India.
- Can I withdraw the RD before 5 years?
Yes, premature withdrawal is allowed after 3 years but with reduced interest.
- Is the interest earned on RD taxable?
Yes, the interest is taxable as per your income tax slab. No TDS is deducted automatically.
- Can I open the account online?
Currently, online RD account opening is limited and depends on the facility offered by individual banks or India Post. Most accounts require a branch visit.
- Can NRIs open a National Savings RD Account?
No, NRIs are not eligible to open a National Savings RD Account.
- What happens if I miss a monthly deposit?
A default fee of ₹1 per ₹100 will be charged. After four consecutive defaults, the account can be discontinued.
- Can I transfer my RD account from one post office or branch to another?
Yes, RD accounts opened in post offices can be transferred to another post office across India. For bank RDs, this depends on the bank's policies.
- What happens if I discontinue my RD account before maturity?
If the account is discontinued before 3 years, no interest is paid. After 3 years, premature closure is allowed with adjusted interest. After 4 consecutive defaults, the account may be treated as discontinued.
- Can I deposit a lump sum amount in a National Savings RD Account?
No, the National Savings RD Account is strictly for fixed monthly deposits. Lump sum deposits are not allowed.
- How is the maturity value calculated?
Maturity is calculated using quarterly compound interest on monthly deposits over 5 years. You can use an RD calculator for precise values.
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