Recurring Deposit Account (RDA)

A Post-Office Recurring Deposit Account (RDA) is a banking service offered by Department of post, Government of India at all post office counters in the country. The scheme is meant for investors who want to deposit a fixed amount every month, in order to get a lump sum after five years. The scheme, a systematic way for long term savings, is one of the best investment option for the low income groups. 

Or We can Say that , It is one of the best investment option for the low income groups. Basically it is a  banking service offered by Department of post, Government of India at all post office counters in the country.

Amount of Investments
  • Minimum investment- Rs. 10 p.m. or any amount in multiples of Rs. 5
  • Maximum investment- No maximum limit
Payment Terms

The deposit shall be paid as monthly installments and each subsequent monthly installment shall be made before the end of the calendar month and shall be equal to the first deposit
Maturity Terms

One withdrawal is allowed after one year of opening a post-office RDA on meeting certain conditions. You can withdraw up to half the balance lying to your credit at an interest charged at 15%. The withdrawal or the loan may be repaid in one lump sum or in equal monthly installments. Premature closure is allowed on completion of three years from the date of opening and in such case, interest is payable as per the rate applicable for the Post Office Savings Bank Account.

After maturity of the account, it can be continued for a further period of 5 years with or without further deposits. During this extended period, the account can be closed at any time.

Returns
The post-office recurring deposits offers a fixed rate of interest, currently at 7.5 per cent per annum compounded quarterly.
 
Tax Considerations:
  • Interest is liable to tax 
  • Balance exempt from wealth-tax 
  • No TDS from interest
Other considerations:
  • Account can be continued for another 5 years on year to year basis with interest. 
  • Rebate is admissible on advance payment of deposits (6 and 12 months). 
  • Nomination facility is available.
Advantages

The post office offers a fixed rate of interest unlike banks which constantly change their recurring deposit interest rates depending on their demand supply position. As the post office is a department of the government of India, it is a safe investment. The principal amount in the Recurring Deposit Account is assured. Moreover Interest earned on this account is exempted from tax as per Section 80L of Income Tax Act. 

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