Post Office RD Scheme
Post Office RD Scheme

Post Office RD Scheme: The government has recently updated the interest rates for small savings schemes offered through post offices for the last quarter of 2023. One significant change pertains to the Post Office Recurring Deposit (RD) where there has been an enhancement of 20 basis points.

Starting from October 1, 2023, to December 31, 2023, depositors will now benefit from an annual interest rate of 6.7% for a 5-year RD, a rise from the previous 6.5%.

Withdrawal Rules and Implications

While the RD matures over five years, depositors have the liberty to close the account after three years from the opening date. However, if an individual decides to terminate the RD even a day before maturity, they won’t receive the prevalent 6.7% interest rate. Instead, the interest will be equivalent to that of a post office savings account, which is currently at 4%.

For those interested in extending their RD beyond the five-year period, it’s essential to apply for an extension at the post office. The extended RD will continue to earn the interest rate that was applicable at the time of its initial opening.

Potential Returns on RD

To give a clearer picture, if an individual sets aside INR 5,000 monthly into an RD, they’ll invest INR 60,000 annually. Over five years, this amounts to a total investment of INR 3,00,000. At the updated 6.7% interest rate, they would earn an interest of INR 56,830, leading to a maturity amount of INR 3,56,830.

Similarly, if one invests INR 3,000 monthly (INR 36,000 annually), the five-year investment would be INR 1,80,000. Using the post office RD calculator with the new rates, they would accrue an interest of INR 34,097, summing up to a maturity sum of INR 2,14,097.

TDS on RD Interest

It’s essential for depositors to note that Tax Deducted at Source (TDS) is applicable to the interest earned on RD. A 10% TDS is levied on RD interest rates. If the monthly interest exceeds INR 10,000, the respective TDS will be deducted.

Conclusively, the revised interest rates and the nuances associated with RDs are essential considerations for potential and existing depositors. While the enhanced interest rate offers attractive returns, one should also be aware of the implications of early withdrawals and the tax liabilities.