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Check The New Penalty Charges Applicable On Post Office RD Account


A post office RD is one of the most familiar investment alternatives available at post offices. As compared to bank fixed deposits, post office recurring deposits have been the most prominent because of the interest rate which is now at 5.8% (compounded on a quarterly basis) and tax benefits. If we compare this interest rate for the quarter ending in March 2021 with SBI FD, the leading public sector bank of India is now currently providing a low interest rate of only 5.4%. Post Office RD comes with a fixed tenure of 5 years and hence the interest earned is completely taxable. If you wish to keep your RD account after 5 years, there is a clause that allows you to extend it for another 5 years, bringing the total period to ten years. Furthermore, RDs that have been extended for another 5 years will continue to receive a quarterly compounded interest rate. With a minimum deposit of Rs 100 per month or any amount in multiples of Rs 10, one can open a post office RD account. After three years from the date of account opening, an RD account can be closed early by submitting the required application form to the respective Post Office. If the account is closed early, or one day before maturity, the interest rate on the Post Office Savings Account will apply. That being said, if you want to open a post office RD account, know the current penalty charges applicable on missing monthly installments.

Check The New Penalty Charges Applicable On Post Office RD Account

Post Office RD Penalty Charges

  • The minimum monthly deposit is Rs100, and deposits in multiples of Rs10 subsequently. You can deposit the money before the 15th of the month if the account was opened within the first 15 days of the month. If the account was opened after that, the money had to be deposited by the month's end.
  • The account is considered defaulted and deactivated if the deposits are not made within the specified time period. To reactivate the account, the depositor must pay a penalty of Rs1 for every Rs100 deposited, in addition to the required amount.
  • After four regular defaults, the account can be reactivated for up to two months. If the account is not reopened within this timeframe, it will be terminated and no more deposits will be allowed.
  • If there are no more than four defaults in monthly deposits, the account holder can then choose to extend the account's maturity period by the same number of months as the number of defaults and deposit the missed installments during the extended period of months or years.


Section 80C of the Income Tax Act allows post office RD account holders to claim tax benefits. Individuals can claim a tax deduction of up to Rs. 1.5 lakh per year under this section. The interest earned by the post office RD scheme, on the other hand, is taxable. Individuals should pay tax according to their income tax bracket. In addition, any interest that crosses Rs. 10,000 is subject to TDS deduction. TDS will be charged at 10% for account holders with PAN Card and 20% for those who do not have the same.

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