Post Office RD vs FD – Choose the Smarter Investment

Recurring deposit is one of the popular financial products provided by the Indian Postal Department. Post office RD is a good investment choice for those who prefer wealth building through a risk-free platform. Read on to know more about post office RD. 

Features of Post Office Recurring Deposit (RD)

The key features of post office recurring deposits are: 

• There are no limitations in opening any number of accounts either singly or jointly by the depositor in any post office.  
• Nominees can be selected by the depositors either before or after the opening of the RD account.  
• Cheques and cash are accepted for RD account opening.  
• The date of deposit will be the date of the cheque credited to the government account.  
  
• Depositors must pay the default amount with a penalty charge in case of any default in any month before paying the current month's deposit.  
  

• In case of default, the penalty charged is 5 paise for each Rs.5 deposited.  
• After 4 consecutive defaults, the account gets discontinued.  
• The withdrawal limit after 1 year of account opening is up to 50% of the total deposit amount.  
• The monthly installment can be paid by the 15th of the next month if the account has been opened in the first half of the month. Payment can be made on the last date of the month for accounts opened in the second half of the month.  
• Minors must apply for the change of account status and convert it to their name on attaining majority.  
• Post office RD accounts are inter-convertible from joint to single and vice-versa.  

Benefits of Post Office Recurring Deposit 

The advantages of starting recurring deposits in the post office are: 

• The starting amount is Rs.10 per month, which can be incremented to multiples of Rs.5, and there is no maximum limit.  
• A minor of age 10 years or above can open post office RD.  
• The post office ensures easy withdrawal of RDs.  
• Under Section 80C of the Income Tax Act, the post office offers tax benefits on RDs.  
• Rebate facility for advance payment only for six installments.  
• Opening funds jointly and transferring them to saving accounts is easy under the post office RD scheme. 
  

Types of Post Office Recurring Deposit (RD)

The various schemes under post office recurring deposits are: 

• Short-term - The tenure ranges between 6 months to 3 years 
• Mid-term - The tenure ranges between 3 years to 7 years 
• Long-term - The tenure ranges between 7 years to 10 years

How Post Office Calculates RD Returns

The Post Office RD return value is calculated by the formula below: 

A= P(1+r/n)^nt 

A- Final amount  

P- Recurring deposit amount 

r- annual interest rate 

n- number of times interest compounded annually 

t- tenure 

Eligibility Criteria for Post Office Recurring Deposits

The eligibility criteria for opening Post Office RD:

• Depositors must be an Indian resident above 18 years of age. 
• RD account for minors over 10 years of age can be opened by their parent or guardian. 
• RD can be opened jointly or singly by any Indian resident of 18 years of age or above. 

Documents Required to Open Post Office RD

Essential documents required for starting recurring deposit schemes in the Post Office are: 

• Application form to open RD 
• Two passport size photographs 
• Identity and address proof- PAN card, Aadhar, Driving license, Voter ID card, Income Tax declaration form or ration card 
• Signature of witness 

Post Office Fixed Deposit 

Post office fixed deposit schemes are a safe and convenient method of earning interest by investing a lump sum at a time and offer attractive rates to depositors. Here are some of the features and benefits: 

Features of Post Office Fixed Deposit 

The main features of fixed deposits offered by Indian Post are: 

• Depositors can open multiple FD accounts. 
• Tenure ranges from one year to 5 years 
• Minors of 10 years or above can open FD accounts but will have to convert the account to their name once they reach 18 years of age 
• The minimum deposit amount is Rs.200 and there is no maximum limit 
• Inter-convertible between single to joint and vice-versa 
• Nominee can be selected at the time of opening and later 
• Transferable from one post office branch to another 
• Cash and cheque are both acceptable for opening the FD 
• Auto-renewal upon maturity 

Benefits of Post Office Fixed Deposit (FD)

The benefits of opening fixed deposits in the post office are: 

• Guaranteed returns on maturity 
• Risk-free because it is not market-dependent 
• Tax benefits are offered on interest earned 
• Depositors can avail loan against the FD value 
• Premature withdrawal with minimum charge is allowed 

Types of Post Office Fixed Deposit Schemes

The post office offers various kinds of fixed deposit schemes to the customers: 

• National Savings Time Deposit Account - Amount deposited once for a tenure of 5 years and offers premature closure. 
• Senior Citizen Savings Scheme - This is for individuals above 60 years of age and deposits can be made in multiples of Rs.1000 for a tenure of 5 years and maximum limit is Rs.15 lakhs. 
• Public Provident Fund (PPF) - Deposit made in lump sum or in 12 monthly installments for a tenure of 15 years. 
• Post Office Monthly Income Scheme - Deposit made in multiples of Rs.1000 for a tenure of 5 years and maximum limit is Rs.4,50,000. 

How Post Office Calculates FD Returns

Post office FD interest is calculated by the following formula: 

Maturity value= P (1+r/4) ^ (n4) 

P- Principal amount 

r- rate of interest 

n- number of years 

Note- This formula is applicable for interest compounded quarterly. 

Eligibility Criteria for Post Office FD

To open post office FD, individuals must fulfill the criteria given below: 

• Account holder must be an Indian resident 
• Minors managed by their legal guardian can open post office FD 

Documents Required to Open Post Office Fixed Deposit

Here is the list of important documents needed to open FD in the post office:

• Address proof – any one of the following: 

1. Electricity bill 
2. Telephone bill 
3. Bank statement with cheques 
4. Passport 
5. Id or certificate issued by Post Office 

• Identity proof – any one of the following: 

1. Aadhar 
2. PAN card 
3. Voter card 
4. Passport 
5. Driving license 
6. Ration card 

• Nominee details 
• Signature of witness 

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