Are you looking for a simple and secure way to save money every month and build a sizable fund for your future? The Post Office Recurring Deposit (RD) scheme might just be the perfect solution for you. It’s a savings plan that encourages you to put aside a fixed amount monthly and earn guaranteed interest over five years.
In this article, we’ll dive into everything you need to know about the Post Office RD scheme in 2025 — from the current interest rate of 6.7% compounded quarterly, eligibility criteria, and how much you can earn by investing ₹500, ₹1000, ₹2000, or even ₹3000 monthly. We’ll also talk about tax implications, penalties for missed payments, and the pros and cons of this trusted government-backed scheme.
| Feature | Details |
|---|---|
| Minimum Monthly Deposit | ₹100 |
| Maximum Monthly Deposit | No Limit |
| Interest Rate (2025) | 6.7% per annum (compounded quarterly) |
| Tenure | 5 years (extendable once for 5 years) |
| Premature Withdrawal | Allowed after 3 years at Savings Account interest rate (4%) |
| Penalty on Missed Payment | 1% per month on missed installment |
| Eligibility | Any Indian citizen (including minors via guardian) |
| Tax Benefit | No tax exemption on deposits; Interest is taxable |
Key Points Summary
- Post Office RD requires monthly deposits for 5 years with a minimum of ₹100.
- Current interest is 6.7% annually, compounded quarterly, giving good returns.
- Anyone, including minors via guardians, can open an RD account.
- Missed payments attract 1% monthly penalty and after 4 months account may be discontinued.
- Premature closure allowed after 3 years but with lower interest (4%).
- Interest earned is taxable as per your income slab; no tax benefits on deposits.
- The scheme is safe and government-backed with guaranteed returns.
- Extending the RD tenure once for another 5 years is possible.
What is the Post Office Recurring Deposit (RD) Scheme?
The Post Office RD scheme is a straightforward savings plan where you deposit a fixed amount every month for a period of five years. The primary goal is to help individuals accumulate savings steadily without the stress of market risks. It’s especially ideal for people who want to save small amounts regularly and watch their money grow over time.
In 2025, the RD scheme offers an interest rate of 6.7% per annum, compounded quarterly. This means your interest earns interest every three months, helping your savings grow faster than simple interest schemes. You can open an account alone or jointly, and even minors can have an account opened by their parents or guardians.
To open an RD account, you need basic documents like your Aadhaar card, PAN card, and a passport-sized photo. Once opened, you commit to depositing a fixed amount monthly for 60 months (5 years). The minimum deposit is ₹100, but there’s no upper limit, so you can save as much as you want.
How Much Can You Earn? Monthly Deposits and Maturity Amount Explained
One of the biggest questions about any savings scheme is: How much will I get back? Let’s break down the maturity amount you can expect based on different monthly deposits over the 5-year period including interest.
| Monthly Deposit (₹) | Total Principal Deposited (₹) | Total Interest Earned (₹) | Maturity Amount (₹) |
|---|---|---|---|
| 100 | 6,000 | 1,215 | 7,215 |
| 500 | 30,000 | 6,677 | 36,677 |
| 1,000 | 60,000 | 13,454 | 73,454 |
| 2,000 | 1,20,000 | 24,386 | 1,44,386 |
| 3,000 | 1,80,000 | 36,462 | 2,16,462 |
| 5,000 | 3,00,000 | 60,770 | 3,60,770 |
As you can see, even small monthly contributions can add up significantly thanks to compound interest. For example, by saving just ₹500 each month, you end up with over ₹36,000 after five years. If you increase your monthly savings, your maturity amount grows substantially.
Eligibility, Account Opening & Rules You Should Know
Opening a Post Office RD account is straightforward and accessible. Here’s who can open one and how:
- Who can open? Any Indian citizen, male or female, rich or poor. Even minors can have accounts opened by their parents or guardians.
- Joint Accounts: Two people can open a joint RD account.
- Documents Needed: Aadhaar card, PAN card, and a passport-size photograph.
- Deposit Requirements: Fixed monthly deposits for 5 years (60 months). Minimum deposit is ₹100, with no upper limit.
- Extension: You can extend your RD account once for another 5 years after the initial period.
- Missed Payments: If you miss a monthly installment, a penalty of 1% per month applies on the missed amount.
- Account Discontinuation: Continuous default for 4 months may lead to account discontinuation, but you can reactivate it within 2 months by paying dues and penalties.
- Premature Closure: Allowed after 3 years but you will get interest at the savings account rate (currently 4%) instead of 6.7%.
Taxation on Post Office RD: What You Should Know
When it comes to taxes, it’s important to understand that the interest earned on Post Office RD is fully taxable. This means:
- The interest you earn will be added to your total income and taxed according to your income tax slab.
- There is no tax deduction or exemption on the amount you deposit (unlike PPF or Sukanya Samriddhi Account).
So, while the RD scheme offers guaranteed returns and safety, you should factor in the tax you’ll pay on interest while calculating your net returns.
Advantages and Disadvantages of Post Office RD Scheme
Like every investment, the Post Office RD scheme has its own pros and cons. Here’s a quick look:
Advantages
- Safe and Secure: Backed by the Government of India, your principal is 100% safe.
- Guaranteed Returns: Fixed interest rate of 6.7% compounded quarterly – no market risk.
- Low Entry Barrier: Start investing with as low as ₹100 monthly.
- Flexible Extension: Option to extend the account for another 5 years.
Disadvantages
- Lower Returns vs Inflation: The 6.7% interest rate is roughly equal to current inflation, meaning real returns could be low.
- Taxable Interest: Interest is added to taxable income, reducing net earnings.
- Penalty on Missed Installments: 1% per month penalty can add up if you miss deposits.
- Premature Withdrawal Loss: If closed before 5 years (minimum 3 years), you only get the savings account interest rate (4%).
Final Thoughts: Is Post Office RD Worth It for You?
The Post Office Recurring Deposit scheme is an excellent choice if you want a safe, low-risk way to build savings steadily over five years. It’s especially suited for people new to investing or those who want the peace of mind of government-backed security.
With a modest monthly commitment starting at ₹100, you can accumulate a decent corpus with guaranteed returns. However, keep in mind the interest is taxable and the rate may barely keep pace with inflation. If you want higher returns and are willing to take some risks, other investment vehicles might suit you better.
But if safety, simplicity, and disciplined saving are your priorities, Post Office RD is a reliable option. Just be sure to keep up with monthly deposits to avoid penalties, and plan your finances so you don’t need premature withdrawals.
Hi, I’m Sonal Sharma. I’ve been writing content for the past 5 years, and over time, I’ve developed a strong interest in topics that truly impact people’s lives—especially the latest news, government schemes, and investment plans. I love breaking down complex updates into simple, easy-to-understand pieces that can actually help readers make informed decisions. Whether it’s a new policy or a savings opportunity, I’m always on the lookout for the kind of information that can make a real difference.