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Post Office Recurring Deposit Scheme: Interest rate

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August 24, 2022


What’s Inside

The post office RD scheme is a legit option — for those who prefer to save & ones that choose to invest. Want to invest small sums of money for a medium-term goal? Or save money and earn some interest in the process? If you answered ‘yes’ to any of these questions, the post office RD scheme might be just what you’re looking for.

The government of India offers this recurring deposit scheme through the Department of Post. Formally known as the National Savings Recurring Deposit (RD) account, this RD scheme gives you many benefits

If you’re curious to learn more about this, let’s take a deep dive into India Post's RD scheme.

What is the post office RD scheme?

The India Post RD scheme is a recurring deposit option that works best as a medium-term savings scheme. When you invest in this scheme, you need to deposit a fixed sum of money at periodic intervals. Over the investment tenure, you'll earn interest on your deposits at the rates set by the government of India. 

At the end of the investment period, you'll receive the principal amount & the interest earned on it. So, you can essentially allow your money to grow by investing in this scheme. 

Are You Eligible To Open An RD Account With The Post Office?

The following individuals can open an account with the post office RD scheme, as per the eligibility criteria set by the government of India — 

  • Indian nationals over the age of 18
  • Guardians on behalf of minors 
  • Minors above 10 years of age, in their own name

Up to 3 adults can open a joint account together with the post office. Also, if you are eligible for this scheme, there is no limit on the number of accounts that you can open with the India Post RD scheme.

The Top Features Of The Post Office RD Scheme

To understand more about the post office recurring deposit scheme, the recurring deposit interest rate in post officem, you need to know its key features.

Investment limits

To open an account with this RD scheme, you need a minimum of Rs. 100. Your deposit amount can also be increased in multiples of Rs. 10, and there is no upper limit on the maximum amount you can invest via this route.

Deposit modes

You can open your RD account by using cash or cheque as the mode of deposit. If you make your deposit via cheque, the date of deposit will be the date the cheque is cleared.

Date of deposits

Have you opened your account on/before the 15th of a calendar month? You can make your next deposit up to the 15th of the month. But if you open an account between the 16th & the month's last working day — the next deposit should be before the last day of the month.

Tenure of deposit 

Your post office RD will have a tenure of 5 years or 60 months from the date you open your account. This makes it a good medium-term investment option if you want to save up for goals that you intend to accomplish in the next 5 or 6 years. 

Extension of deposit tenure

If you want to, you can submit an application at your post office and extend the investment period by another 5 years. In case of an extension, the interest rate applicable will be the same interest rate that was in force when you first opened your RD account.

Premature closure 

You can close your account in the post office RD scheme 3 years after opening it. In case of extended deposits, you can close your account at any time during the extended period.

Loan against RD

After you’ve consistently made 12 deposits, you can avail a loan of up to 50% of your RD account balance. You can repay this loan as a lump sum amount or in monthly instalments. The interest rate on this loan will be 2% over the RD interest rate. 

This interest will be calculated from the date of availing the loan to the date of repayment. And if you don’t repay the loan till maturity, the loan plus the accompanying interest will be deducted from the maturity payouts.

Taxation of post office RD interest

The interest you earn from the India Post RD scheme is taxable as per your income slab. Furthermore, if your annual interest from this scheme exceeds Rs. 10,000, your interest will be subject to TDS at the rate of 10% (or 20% if you do not have an active PAN).

What Is The Rate Of Interest In The Post Office RD Scheme?

The recurring deposit interest rate in post office is 5.80% per annum as of July 2022. This rate of interest applies to both senior and non-senior citizens. Here are a couple of key things you should know about the post office RD interest.

  • The interest you earn is compound interest.
  • The interest is compounded on a quarterly basis.

To compute this interest, you can use this formula —

Compound interest = P [(1 + i)n – 1]

Here, the letters stand following parameters.

  • P represents the principal amount deposited
  • i stands for the rate of interest per annum
  • n stands for the number of years of investment

This interest is added to your deposits and gives you a sizable maturity amount at the end of the investment tenure. You can calculate the RD maturity amount using the formula shown below.

Maturity amount = P (1 + r/n)nt

Here, the letters stand following parameters.

  • P represents the principal amount deposited
  • r stands for the rate of interest per annum
  • t is the time period of investment
  • n stands for the number of times the interest is compounded per unit of the investment time

In the case of the RD scheme in a post office, deposits are made at regular intervals. So, the maturity amount has to be computed for each of the deposits made. These amounts are then added to give you the final corpus at maturity. Clearly, that can get very tedious. 

This is why it’s advisable to use an RD calculator to check the interest you’ll earn and the maturity amount you will receive from your post office RD.

Here is a compilation of the 6 best post office savings schemes designed for a boy child in India.

Summing it up

The India Post RD scheme is a useful savings option for both conservative and aggressive investors. If you belong to the former category, you’ll find the guaranteed interest from this scheme to be exactly what you are looking for. And if you happen to be a risk-taker, this RD scheme can help reduce the overall risk in your portfolio. Either way, it’s a win-win.

Still Curious? Learn more about schemes here.

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Frequently Asked Questions (FAQs)

1. Is a post office RD a good investment option?

Yes, the post office RD scheme is a good savings option for anyone who wants to earn guaranteed interest by depositing small sums of money periodically. If that sounds like you, this is an ideal scheme to consider. Currently, the scheme offers interest at the rate of 5.8% per annum, compounded quarterly.

2. Which RD plan is the best?

There are different RD plans in India, offered by banks, post offices, and non-banking financial companies (NBFCs), among others. All these recurring deposits work similarly, so you can compare interest rates and the terms and conditions and choose an RD plan that is suitable for your financial needs.

3.What is the recurring deposit interest rate in post office 2022?

Interest rate of RD in Post Office in 2022 is 7.1 % per annum (compounded yearly).

4. Is there a 3 years RD plan in post office?

You can prematurely withdraw the RD in post office. However, this premature withdrawal can be allowed only after 1 year from the date of opening the account.

5.What is the best recurring deposit interest rate in post office?

Some banks like City Union Bank, Deutsche Bank and Karur Vysya Bank offer RD on 7% or slightly more interest rate for 3-4 year tenures. You can check out multiple banks and interest rates before you start a RD.


Investment and securities are subject to market risks. Please read all the related documents carefully before investing. The contents of this article are for informational purposes only, and not to be taken as a recommendation to buy or sell securities, mutual funds, or any other financial products.
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