Post office Recurring Deposit Account (RDA)

What is Post office 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. 

Features
The minimum investment in a post-office RDA is Rs 10 and then in multiples of Rs. 5/- for a period of 5 years. There is no prescribed upper limit on your investment. 

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. In case of default in payment, a default fee is chargeable for delayed deposit at 0.20 Paise per month of delay, for Rs.10 Denomination. After more than four defaults, the account shall be treated as discontinued in case the account is not revived within two months from the fifth default.

For Advance deposits for 6 months or 12 months, a rebate is allowed at the prescribed rate (For Rs 10 denomination:- Rs.1/- for 6 advance deposits, Rs.4/- for 12 advance deposits.

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 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. 

Now Pay Roll Savings Scheme is also available for employees of various Establishments.

Returns
The post-office recurring deposits offers a fixed rate of interest, currently at 7.5 per cent per anum compounded quarterly. 

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. 

How to Start Post office RDA
A post-office RDA can be opened at any post office in the country by filling up the appropriate forms. The account can be opened by an individual adult as a single person account, two adults in a joint mode, or by a guardian on behalf of the minor who has attained the age of 10 years in his own name. A pass book is issued at the time of opening the account. If there is a loss, theft or the passbook is mutilated, a duplicate is issued on a charge. The deposit can be made personally at the particular post office every month or can be made through an appointed agent, who would collect the money from you and enter the same in your passbook.