A recurring deposit can be one of the best options for individuals who are interested in contributing regularly to their savings every month. In a recurring deposit, one can deposit fixed amounts till the maturity and earn interest while contributing.
A recurring deposit (RD) can be opened in banks and post office as well. If an individual is looking for flexibility they can consider investing in bank RDs.
6 features of recurring deposit in post office
1. If the account is opened on the 15 of the month, the next deposit can be made until 15th day of next month.
2. If the account is opened between the 16th day and last working, the deposit can be made until the last day of a calendar month.
3. There is a rebate on advance deposit of at least 6 installments.
4. The interest is paid at per annum on quarterly compounded basis.
5. If the payment is not made on a prescribed date, there will be a charge of 5 paise for every 5 rupees shall be charged.
6. If the payment is made for consecutive 4 times, the account becomes discontinued. The same can be revived in two months but if the same is not revived within this period, no further deposit can be made.
How to open a recurring deposit in a post office?
Step 1- Visit the Post office
Step 2- Fill the RD form and sign
Step 3- Specimen signature slip.
Step 4- Pay-in-slip (to deposit the amount)
Submit together with an amount you want to open a RD. Note that there is a separate form for senior citizens
For the subsequent deposits made in RD if made by Cheque, date of credit of Cheque shall be treated as the date of deposit.
Why you should open RD in a post office?
In the last Union budget it was announced that TDS will be deducted on recurring deposits, if the interest exceeded is Rs 10,000 for the year. The same is not applicable in case of Post office recurring deposit. Hence, you will be able to save the TDS money if you invest in the same.
If your income is below Rs 2.5 lakh and if you have earned interest of more than Rs 10,000, banks will deduct TDS in such cases. Such individual should submit Form 15 G/H which ever is applicable and claim for the refund on TDS in your ITR.
For individuals who fall in tax brackets, the TDS of 10 per cent will be charged by the bank for the interest you earn above the Rs 10,000.