Post Office FD vs Post Office RD: Key Features To Know Before Investment

When it comes to investment in low-risk instruments, people often prefer to park their money in bank fixed deposits or opt for recurring deposits. Apart from banks, the Indian Postal Department also offers a variety of financial products and investment options for investors with a low-risk appetite.
Post Office Recurring Deposit (Post Office RD) and Post Office Fixed Deposit (Post Office FD) are among the few Post Office investment options. These options allow investors to save their money regularly and help them get guaranteed returns.

Key Features of Post Office RD

-Post Office RD offers flexibility and allows investors to open any number of accounts, either individually or jointly, without any restrictions. This versatility extends to the nomination process, where depositors can appoint nominees at any point before or after the account has been opened.

-Post Office RD functions by operating in monthly installments for deposit. Other than flexibility, Post Office also accepts both cheques and cash for RD account openings, with the date of deposit being the day the cheque is credited to the government account.

-Post Office RD imposes a nominal penalty on delay in payment in any given month, it is also designed to accommodate the occasional slip. If a depositor fails to make a payment in any given month, they can settle the default amount along with a nominal penalty charge before proceeding with the current month's deposit. A specific penalty of 5 paise for every Rs.5 deposited is applied in such cases. However, after four consecutive defaults, the account faces discontinuation.

-To offer some liquidity, the scheme allows for up to 50% of the total deposit to be withdrawn after the first year of account opening.

-Post Office RD schemes are highly affordable as the minimum amount to start a recurring deposit in the Post Office is Rs 10 per month. People can also receive increments available in multiples of Rs 5. While the minimum amount of starting a post office RD is extremely low, there is no capping on the maximum amount of investment in Post Office RD, which makes it extremely attractive for a wide range of investors.

-Minors aged 10 years or above have the privilege to open their own RD accounts, promoting financial literacy and savings habits from a young age. The Post Office also facilitates easy withdrawals and offers tax benefits under Section 80C of the Income Tax Act, alongside a rebate facility for advance payment of six instalments.

Key Features of Post Office FD

-Post Office FD encourages investors to make regular savings by investing a large amount in lumpsum.

-Just like Post Office RD schemes, post office FD schemes are risk-free and are market independent. FD schemes can be opened for a tenure of one year from five years.

-The minimum amount for depositing in FD is Rs 200 and there is no maximum limit for Post Office FD.

-Post Office FD schemes offer tax benefits to investors on the rate of interest earned. The investment instrument also allows people to take a loan against their FD. Despite being a low-risk investment option, it offers decent returns.