How Can You Save Rs.14 Lakh in 5 Years through Post Office RD?

It is a fast-paced life. One cannot ignore being financially prepared for the future. It is highly necessary and serves you when you face financial emergency during some health crisis, marriage, education loan repayment or home renovation. With the Post Office Recurring Deposit (RD), the people earning small and medium incomes get to benefit. This is a scheme that has the government's backing.

What is a Recurring Deposit?

A Recurring Deposit refers to one of the types of savings schemes. Here, you deposit a fixed amount every month into the account that can be in a bank or a post office. As the amount grows with time, at the maturity time, you have a lumpsum amount for use.

What is a Post Office RD?

A Post Office RD is one where the amount is deposited in a post office rather than in a bank. It is considered a rather beneficial option because it gives a guarantee from the government's side. It hence serves as one of the safest financial instruments that is available to the small/medium income earners.

Example

For instance, when a person deposits Rs.10,00 every month for 5 years in a post office RD, s/he receives an amount of Rs.7,13,659 at the time of maturity. Moreover, this amount includes Rs.6 lakh as the amount invested as total deposits and the remaining Rs.1,13,659 is your interest earned when the interest is compounded quarterly.

Similarly, when you deposit Rs.20,000 every month for 5 years, you get to increase this amount over Rs.14,00,000 in that time-frame. Let's us see this in further detail.

Suppose you depositRs.20,000 every month in a Post Office RD.

When calculated as per the rate of interest of 6.7% per annum compounded quarterly, the yield during maturity comes out to be Rs.14,27,000.

This amount includes Rs.12,00,000 as the total deposits of 5 years and the remaining Rs.2,27,000 is what you earn as interest.

Hence,

If you deposit Rs.20,000 per month for 5 years, your total investment will be Rs.12,00,000.

With 6.7% annual interest (compounded quarterly), your maturity amount will be Rs.14,27,315.

That means you earn an interest of Rs.2,27,315 which is totally risk-free.

The scheme initially runs for 5 years but you can extend it for another 5 years so that you will be able to build an even bigger fund over time.

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Rate of Interest

For the quarter from July to September 2025, the rate of interest has been kept as 6.7% p.a. for the Post Office RD where the interest is compounded on an annual basis. It is the government only that reviews the interest rates and revises them every three months. This benefits by bringing competitiveness with the other options available for savings.

More on Post Office RD

Here are some interesting points to know about post office RD:

Loan Availability

When you complete a year in this RD scheme, you are open to availing a loan of up to 50% of what you deposited in total. This way, the depositors can easily save money for emergency situations that may arise any time in the future. Interest rate, though, will be higher by 2% than the RD interest rate.

Benefits for Employees

The scheme is beneficial for salaried individuals because they earn on a monthly basis and get to save a fixed portion of that income as post office RD monthly deposit. This makes it an ideal option, especially when you have some future goals and need to collect funds for the same. This is a low-risk investment and lets you avoid the volatility that exists in the market and other options of savings.

Scheme Extension

As mentioned, one can extend the scheme to the next five more years. The depositor needs to place the request so as to get this benefit. This can turn out to give you a considerably large savings for your financial plans and potential emergencies. Retirement is yet another time period where these funds can serve you greatly.

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Points to Note

• Know that the deposits need to be made each month without fail.
• Minimum monthly deposit is Rs.100, as your investments can start with an amount as small as Rs.100 in a month
• Upon missing payments, you will have to pay the penalty.
• The account can be managed online as well
• One can open such an account by using the Aadhaar, PAN and a passport-size photo.

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