Post office recurring deposit (RD) is among one of the most favoured investment options among investors. We explain the penalties and other details related to these investments
Post office recurring deposits currently offer an interest rate of 5.8%, compounded quarterly. The interest received is fully taxable. A quarterly compounding of interest will increase the effective yield. This is a government-backed scheme; therefore, it is preferred by conservative investors. However, if you are planning to invest in recurring deposits, you should know the penalties as well in case you miss on monthly installments.
The minimum monthly deposit is Rs100 and thereafter one can deposit in the multiples of Rs10. In case the account was opened in the first 15 days of the month, you need to deposit the amount till the 15th of the month. In case the account was opened after that the amount has to be deposited before the last date of the month.
In case the amount is not deposited within the prescribed time, the account is considered as defaulted and is deactivated. To reactivate the account, the depositor has to pay Re1 for every Rs100 to be deposited as penalty, along with the required amount to be deposited.
The account can be reactivated till two months after four regular defaults. If the account is not revived within this period, it becomes discontinued and no further deposit can be made.
If there are less than four defaults the account holder can extend the maturity period by the same number of months at his or her choice.
One can also take a loan on RD at the rate of 2% plus the rate of interest on RD.
The RD account can be closed prematurely after 3 years after the opening of account. In case of premature closure, post office savings account interest will be paid.
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