An RD account is a type of term deposit that enables you to deposit a predefined amount for pre-defined periods. The amount of the instalment, once specified, cannot be changed. An eligible individual can open a bank or post office RD account online as well as offline by visiting the nearest branch. If you are willing to open an RD account to reap good returns, State Bank of India (SBI) and the post office provide their customers with RD alternatives. So let's compare here both State Bank of India (SBI) and the post office RD account to get the best one out.
- For the general public, SBI RD interest rates range from 5 percent to 5.4 percent with an additional interest rate of 50 basis points for seniors. From 8 January 2021 onwards these rates are valid. Post Office RD bid 5.8 percent which is effective from January 1, 2021 per annum which is compounded by a quarterly basis.
- Post office RD comes with a maturity period of 5 years whereas SBI recurring deposits have a tenure of 1 year to 10 years.
- It is possible to open an SBI RD account via cheque/cash, but a post office RD account can be opened by depositing the minimum balance limit.
- By visiting the nearest post office branch you can open a 5-Year Post Office Recurring Deposit Account offline, whereas you can open an SBI RD account by visiting the official net banking portal of SBI.
- Customers are required to render monthly deposits of a minimum of Rs 100 and multiples of Rs 10 into the SBI RD account. In terms of deposits, there is no upper ceiling. But Rs 10 per month, or any amount in multiples of Rs 5, is the minimum amount needed for opening a Post Office RD. There is no upper ceiling, however, on contribution.
- The 5-year RD rate for the post office is determined by the government. For SBI, though, the rates of interest differ across the tenure.
SBI RD Rates
|Tenure||ROI for general public||ROI for senior citizens|
|7 days to 45 days||2.9||2.9|
|46 days to 179 days||3.9||3.9|
|180 days to 210 days||4.4||4.4|
|211 days to less than 1 year||4.4||4.4|
|1 year to less than 2 year||4.9||5.0|
|2 years to less than 3 years||5.1||5.1|
|3 years to less than 5 years||5.3||5.3|
|5 years and up to 10 years||5.4||5.4|
Key takeaways of SBI RD scheme
An individual with many benefits is given by the SBI Recurring Deposit Scheme. The following are some of them:
- A loan against the amount invested in the RD can be used by individuals. One can avail up to 90% of the amount against his or her RD account. SBI also gives individuals the right to overdraft the amount of RD available.
- The tenure varies between 12 months and 120 months for the deposit. Consequently, unlike other RDs, at the convenience of the account holder, the recurring deposit provided by SBI may also be used as a long-term investment tool.
- SBI RD scheme also comes with a nomination facility using which an account holder can nominate his spouse or other family members as a nominee.
- SBI enables minimum deposits on their RD account in multiples of Rs. 100.
- Individuals at every SBI bank branch can use the facilities of the SBI RD scheme.
SBI RD account charges
Considering several instances there are some charges that are imposed to the account holders:
- Individuals keeping an account for a period of five years or longer will be charged a penalty of Rs. 1 for every Rs. 100 if the due monthly instalment is not paid.
- The penalty imposed will be Rs. 2 for every Rs. 100 for those with an account of more than 5 years.
- A service charge of Rs. 10 will be imposed on individuals who have three or more successive defaults in the deposit of monthly instalments until the RD account matures.
- The account will be terminated with the amount paid to him/her prematurely if the account holder fails to render six consecutive deposits in the RD account.
Taxation on SBI RD
According to the Income Tax Act, 1961, RD is taxable. The amount deposited in an RD is liable for in the annual income of an individual, and the interest received on it receives 10 percent of TDS. That being said, TDS on RD is only available if in a financial year the gross interest received is over Rs. 10,000. By submitting Form 15H or Form 15G, individuals can also avoid TDS applicable to their interest.