Let us see about Recurring Deposit investment scheme in India below in detailed.
The Recurring Deposit (RD) is a government-backed and bank-offered savings scheme in India, available through post offices and banks, offering secure, disciplined monthly savings with tenures from 6 months to 10 years, 6.7% annual interest rate for post office RD in Q4 FY 2025-26 (compounded quarterly), and partial tax benefits under Section 80C for certain deposits—designed for salaried individuals, homemakers, and families building emergency funds or short-term goals, it provides capital protection, flexible tenures, and easy access with low minimum deposits starting at ₹100/month.
Where Should I Apply for a RD Account?
Open RD accounts easily at these authorized locations with simple KYC documents (Aadhaar, PAN, photo, address proof).
- Post Offices: All head and sub-post offices across India, ideal for rural access, cash deposits accepted, online via IPPB app.
- Nationalized Banks: SBI, PNB, Bank of Baroda, Central Bank—any branch with passbook issued.
- Private Banks: HDFC, ICICI, Axis, Kotak designated branches for higher rates.
- Online via Net Banking: Bank portals or India Post Payments Bank using Aadhaar eKYC for instant setup (no branch visit).
Documents Required: Account opening form, PAN/Aadhaar, 2 photos, nominee details, minors need guardian ID.
Deposit Methods: Cash/cheque at branch, auto-debit, NEFT/UPI/online transfer, passbook or e-statement for tracking.
Guardian opens for minors, transfer accounts between banks/post offices anytime.
Eligibility Criteria
RD welcomes nearly all Indian residents, regardless of age, job, or income, for inclusive family savings.
- Kids (Minors under 18): Parents/legal guardians open and operate, child controls at 18 (guardian ID).
- Youth/Adults (18+): Students, employed, self-employed, homemakers all qualify (PAN optional for post office).
- Unemployed: Jobless youth, homemakers—no salary proof needed.
- Senior Citizens (60+): No age cap, often higher rates (up to 0.5% extra).
No limit on number of accounts, joint accounts allowed (up to 3 holders).
Who is Not Eligible
Restrictions ensure focus on resident individuals.
- NRIs: Can open via NRO accounts only, no repatriation.
- Foreign Citizens/PIO/OCI: Unless Indian resident.
- Institutions: Trusts, societies, companies cannot open (individuals only).
Example
In a family of 6—Father, Mother, and 4 kids—each can open multiple RDs without PAN limits, unlike PPF.
Key Rule: No combined limit per PAN—invest as much as needed across accounts (min ₹100/month per RD).
Father’s RDs
- Personal RD: ₹5,000/month for 5 years
- Kid 1’s RD: ₹1,000/month
- Kid 2’s RD: ₹1,000/month
Total flexible, no cap (Above values are just examples).
Mother’s RDs
- Personal RD: ₹3,000/month
- Kid 3 & 4 RDs: ₹500/month each
They can share or adjust amounts freely (min ₹100/month to max no limit per RD)(Above values are just examples).
Key Features
Interest Rate: 6.7% p.a. for post office RD FY 2025-26 (Q4), reviewed quarterly, banks up to 8.5%, compounded quarterly.
Tenure: 6 months to 10 years, fixed at opening.
How Interest Works in RD
- Interest Rate: Set quarterly, current 6.7% p.a. for post office.
- Compounding Frequency: Quarterly on deposited amounts.
- Calculation Basis: Simple interest on monthly deposits, added to principal quarterly.
- Crediting: Interest paid at maturity or quarterly statements.
- Taxation: Interest taxable as per slab, TDS if >₹40,000/year (₹50,000 for seniors).
- Impact of Deposits Timing: Monthly fixed date, late fees apply.
- No Risk: Returns guaranteed by government/banks, principal safe.
How to calculate?
Calculate using RD calculator (online tools on bank/post office sites).
1st Example: Full ₹10,000/month for 5 years (at 6.7%)
Total tenure: 60 months
Result: Maturity ≈₹7,13,659 (Principal ₹6L + Interest ₹1.13L)
2nd Example: ₹5,000/month for 3 years
Total tenure: 36 months
Result: Maturity ≈₹1,89,500 (Principal ₹1.8L + Interest ₹9,500)
3rd Example: ₹2,000/month for 2 years (senior rate 7.2%)
Tenure: 24 months
Result: Maturity ≈₹50,800 (Principal ₹48,000 + Interest ₹2,800)
Loans, Premature Closure & Flexibility
Premature Closure
When? After 3-6 months (post office) or 1 year (banks).
How much? Full amount minus penalty (0.5-1% lower interest).
Example: ₹10,000/month RD after 2 years (instead of 5), get reduced interest.
Nomination & Loans
Nominee changeable anytime. No loans against RD typically, but banks may offer overdraft.
Extension
Renew at maturity for new tenure/rate, or close and reinvest.
Common Mistakes & Penalties (Avoid these)
- Missed Installments: Penalty ₹10-15 per missed ₹100, account discontinued after 4 misses.
- Premature Closure Early: Lose 1-2% interest.
- Wrong Rate: Check quarterly revisions for new RDs.
- TDS Surprise: Interest >₹40k triggers 10% TDS.
RD Example (₹10,000/month for 5 years at 6.7%)
| Year | Monthly Deposit (₹) | Annual Invest (₹) | Cumulative Invest (₹) | Approx. Balance at Year End (₹) | Tax on Interest (30% slab, approx ₹) |
|---|---|---|---|---|---|
| 1 | 10,000 | 1,20,000 | 1,20,000 | 1,25,000 | 1,500 |
| 2 | 10,000 | 1,20,000 | 2,40,000 | 2,57,000 | 3,500 |
| 3 | 10,000 | 1,20,000 | 3,60,000 | 3,95,000 | 6,000 |
| 4 | 10,000 | 1,20,000 | 4,80,000 | 5,40,000 | 9,000 |
| 5 | 10,000 | 1,20,000 | 6,00,000 | 7,13,659 | 12,500 |
Final Totals
- Total Investment: ₹6,00,000
- Maturity Value: ₹7,13,659
- Interest Earned: ₹1,13,659 (taxable)
- Tax Paid (30% on interest): ≈₹33,500 (varies by slab)
Who faces TDS?
Interest >₹40,000/year triggers 10% TDS (₹50k seniors).
| Tax Slab | Annual Interest (₹) | TDS (10%) | Net Interest (₹) |
|---|---|---|---|
| <₹40k | 15,000 | 0 | 15,000 |
| ₹40-80k | 50,000 | 5,000 | 45,000 |
| >₹80k | 1,00,000 | 10,000 | 90,000 |
This is all about RD investment scheme in India.
