Want to build ₹7 lakh fund with monthly savings?:Here’s how the Post Office RD Scheme works with just ₹340 a day

If you have a large amount of money at once, you can opt for a fixed deposit (FD) or make a lump-sum investment in mutual funds. However, if you don’t have a big amount available and can only save small sums every month, the question is how to grow those savings into a substantial fund. For such investors, Post Office savings schemes are considered reliable and beneficial. Being government-backed, these schemes are safe, easy to invest in, and do not require a large initial amount. The Post Office Recurring Deposit (RD) scheme is especially suitable for small savers. By investing a fixed amount regularly, you can earn guaranteed returns at a fixed rate of interest. In today’s Your Money column, we take a closer look at the Post Office RD scheme and explain: Q: What is the Post Office RD Scheme? A: The Post Office Recurring Deposit (RD) scheme is a government-backed savings scheme that allows investors to deposit a fixed amount every month. It is specially designed for people who prefer regular savings and want safe, guaranteed returns. At present, the Post Office RD scheme offers an interest rate of 6.7% per annum, calculated on a quarterly basis. The interest is compounded, which means you earn interest on both your investment and the interest already earned—helping your savings grow faster. Q: What are the benefits of the Post Office RD Scheme?
A: The Post Office RD scheme is a safe and reliable investment option that helps build a large fund through small monthly savings. It comes with a government guarantee, offers a fixed interest rate, and encourages disciplined monthly investing. Check out all the key benefits in the graphic below. Q: How much investment is required to build a ₹7 lakh fund in 5 years? A: By saving just ₹340 per day and investing in the Post Office RD scheme, you can deposit a total of ₹6 lakh over five years. A daily saving of ₹340 translates to a monthly investment of ₹10,000. At the current interest rate of 6.7% (compounded quarterly), this investment can earn you approximately ₹1 lakh as interest. As a result, your total maturity amount after five years can be close to ₹7 lakh. This strategy is ideal for those who want to build a sizeable fund within a fixed time frame through small, regular monthly savings. Q: How can you invest in the Post Office RD scheme? A: You can start a Post Office RD by opening an account at your nearest post office. The account can also be opened online. The complete process is explained step by step in the graphics below. Q: If money is needed midway, can a loan be taken against the Post Office RD? A: Yes, a loan can be taken against a Post Office RD if you need funds during the tenure. The condition is that at least 12 monthly installments must have been deposited in the RD account. You can avail a loan of up to 50% of the total amount deposited. However, the loan carries an interest rate that is 2% higher than the RD interest rate. For example, if your RD earns 6.7% interest, the loan taken against it will attract 8.7% interest. The loan can be repaid either in installments or as a lump sum before maturity. If the loan is not repaid on time, the outstanding amount is deducted from the maturity value, and the remaining balance is paid to the investor along with interest. Q: Are Post Office savings schemes better than bank schemes? A: There is no direct comparison, as both bank and post office schemes have their own advantages. However, Post Office savings schemes are often considered more convenient due to the following reasons: Q: Who benefits most from the Post Office RD scheme? A: The Post Office RD scheme is especially beneficial for: Q: Who can invest in the Post Office RD scheme? A: Anyone can invest in the Post Office RD scheme. There is no restriction based on profession or income category. Students, salaried employees, self-employed individuals, and business owners can all invest in this scheme. A key highlight is that there is no age limit. Children, adults, and senior citizens can all benefit from this secure savings option by making regular small deposits. Q: What is the duration of the Post Office RD scheme? A: The Post Office RD scheme has a tenure of 5 years. Investors deposit a fixed amount every month, and at the end of five years, the total deposits along with interest are paid as the maturity amount. The scheme also offers the option of premature closure if required. Q: What documents are required to open a Post Office RD account? A: To open a Post Office RD account, the following documents are required (online or offline): If you wish to add a nominee, you will also need the nominee’s identity proof and date of birth proof. Common Questions About Post Office RD Q: What is the minimum deposit amount for a Post Office RD? A: The minimum monthly deposit amount is ₹100. Q: What happens if an RD installment is not paid on time? A: If the monthly installment is not paid by the due date, it is treated as a default. A penalty of ₹1 for every ₹100 defaulted is charged for each month of delay. Q: Can a loan be taken against a Post Office RD? A: Yes, after completing 12 installments and one year of account operation, you can take a loan of up to 50% of the deposited amount, subject to interest. Q: Can the Post Office RD tenure be extended? A: Yes, the RD tenure can be extended for up to another 5 years. Q: How is interest calculated on a Post Office RD? A: Interest on Post Office RD is compounded quarterly. Q: Is Post Office RD tax-free? A: Yes, tax exemption is available under Section 80C of the Income Tax Act.