Difference Between Post Office Savings Account & RD Account

There are a lot of post office saving schemes offered by post office in India to the people having variety of investment needs. This set of financial instruments encourages saving and provide financial security to the people of India.

As these Post Office schemes are backed by the government, they are safe and reliable investment avenues for the individuals. Post offices in India offer their services to the people through a vast network of over 1.55 lakh post offices and around 5.70 lakh employees.

Post Office Savings Account: It a simple yet reliable way to save and grow your money and you can use it like a friendly piggy bank backed by the government. Your money is safe in a Post Office Savings Account and you also earn an interest at a fixed rate (currently 4%). Though it is not very high still it is steady and better than bank's savings account.

In order to open a PO Savings Account, you need to visit your nearest post office, fill up a simple account opening application form, attach the required documents (like Aadhaar and PAN cards) and deposit a minimum of Rs.500 and your account will be opened at the post office. You need not pay tax on the interest earned up to Rs.10,000 per financial year.

It has several benefits like you can move your account from one post office to another, you can deposit as much as you want. Further, post offices exist everywhere so it is very convenient to open savings account with the post office.

Post Office Recurring Deposit (RD): It a simple and systematic deposit scheme offered by the Indian Post Office. The Post Office RD aims to encourage small savings among people particularly low and middle-income groups. It helps you to save regularly in a disciplined manner. It is one of the best options for those who find it difficult to save a lump sum at once.

After opening the RD account, you deposit a fixed amount every month and the RD matures after 60 months. Interest is compounded quarterly so your money grows steadily.

Your investment in PO RD is safe because it is backed by the government. You earn interest at a fixed rate (currently around 6.7%). You can start monthly deposit with as little as Rs.100. Unlike stock market schemes, RD account has no market risk.

In order to open a PO RD Account, you need to visit your nearest post office, fill up a simple account opening application form, attach the required documents (like Aadhaar and PAN cards) and deposit a minimum of Rs.100 and your account will be opened at the post office.

Two important post office saving schemes offered by post office in India are Post Office Savings Account and Post Office Recurring Deposit. Both offer investment benefits but they differ in objective of investment. Let us check out major differences between Post Office Savings Account and Post Office Recurring Deposit in order to make proper investment decision.

Particulars of Post Office Savings Account It is beneficial for the persons who want to start saving small amounts and want to earn fixed interest on their investment with minimum risk. Persons can open only one savings account in one post office. Minors over 10 years of age can open and operate a post office savings account on independent basis. There is no lock-in of investment. The interest in the Post Office Savings Account is calculated monthly and credited annually into the account.

Traits of Post Office RD Account: Post Office RD account permits one early withdrawal of up to 50% of the balance after one year from the RD account's opening date. If you want to continue with the RD account after its maturity i.e. even after 5 years, then you can extend RD for 5 more years making the maximum tenure is 10 years.