Flexibility is one thing which every individual demands from his or her investment. Whether it is flexibility to invest or to withdraw from it. If any investment product demands lump sum investment then we often take time to think that whether or not should we take it? But when the product offers flexibility to make the investment on monthly basis and as per our suitability and comfort level then we immediately usually get ready to invest in that particular product. Such a product is offered by the Post Office of India which is lucrative and risk free namely Post Office Recurring Deposit Scheme.
Post Office recurring deposit is a product which is a kind of fixed deposit offered by post office but the investment can be done on the monthly basis by the investor. By “recurring”, it means that continuous investments can be made in the form of small deposit into this account. This product provides flexibility to the investor and is very famous in lower to middle class income group of individuals. This product comes with the maturity period of 5 years and has a very attractive interest rate which is compounded quarterly and payable annually. The current interest rate for the product is 7.3% p.a. compounded quarterly. As it is a government backed scheme so the interest rate fluctuates as per the rules and guidelines of the government.
Post office RD account is available to all the citizens of India. Any Indian national can avail the benefit of this account. You are free to open this account in any post office according to your suitability. You just have to fill the form and submit your valid address proof and ID proof i.e. Voter ID card, PAN card, Aadhaar card etc. and a passport size photograph. A minor who has attained 10 years of age is also eligible to open this account. However when the minor attains majority he must convert his or her account. This investment option provides you the flexibility to open it on single as well as on joint basis. 2 adults can open this account jointly. There is no restriction on opening of number of accounts and an individual can open any number of accounts as he or she desires and can afford. An individual can also easily transfer his/her account freely from one post office to another.
Now comes the most attractive part of this account and that is, you can open this account with as minimum as Rs 10 per month or any amount in the multiple of Rs 5, and there is no upper limit fixed for the investment. So if a person wants he/she can create this account with monthly deposit of mere Rs 10. As mentioned earlier this product is made to provide flexibility and affordability so, you can deposit into this account any amount which you can afford or able to save in the month in the multiple of Rs 5. You can make the deposit through cash or cheque. In case you make payment through cheque then the date at which you present the cheque to the post office will be considered as your date of deposit. As soon as your account is opened you will be provided with the pass book so that you can make the entries of your payment. The nomination facility under this scheme is also available at the starting as well as after opening the account.
Monthly deposit frequency is pre- determined in this scheme and you should make sure that if you have made your initial deposit on 15th of any month then, the next deposit must be made within 15th of subsequent month. Likewise, if the deposit has been made after 16th of any month or up to last date of month then the next subsequent deposit shall be made by the 16th of next month or up to the last date of the month. Let’s understand this with an example
Let’s say that you opened your account on 15th of September and made deposit on this day. So the nest deposit should be made within 15 of October. Similarly if the date is 16th of September then the next deposit shall be made within 16th of October.
Now let’s have a look towards the maturity proceeds of the account which an individual receives after 5 years. Let’s suppose that Mr A deposits Rs 5000 per month to his RD account. So at the end of 5 years with the rate of interest of 7.3% p.a. compounded quarterly, he is entitled to receive Rs 362526. This amount is taxable in the hands of the investor and the account can be extended for further 5 years as per the wish of the investor. This account also provides rebate if the advance deposit for 6 months is being made by the investor. To know about the details you can always contact your financial planner or enquire about it from the post office.
This account demands commitment from the investor in terms of regular monthly payment. But you cannot be certain every time about your financial need and if in case in some month you defaulted in making the deposit then, if the default of deposit is less than 4 months then the penalty of 5 paisa for every Rs 5 of deposit for the defaulted period will be charged as penalty to revive your account. If the defaulted period exceeds 4 months then the account will be discontinued, however you can revive it within 2 months, well if not then, no further deposits can be made.
For example if you defaulted in making payment for a month and the deposit which you make is Rs 5000 then, the penalty will be of Rs 1250 (5000 multiplied by Rs 5 and 5 paisa of that amount) will be charged at the time of revival of account.
Now if the financial need arises and you want to withdraw the amount from your RD account then you are eligible to do that only after completion of one year of successful deposits. After the completion of successful 12 months deposits, you can withdraw up to 50% of the accumulated amount till that period and only for one time.
For example, if you have completed 3 years of your recurring deposit and wish to withdraw from your account then, let’s say if you deposited Rs 5000 every month then at the end of 3 years your accumulated balance will be Rs 201632. 50% of this amount i.e. Rs 100816 can be withdrawn in the multiple of Rs 5 i.e. Rs 100815.
Although the partial withdrawal facility is available for some uncertain needs but this amount must be repaid (in lump sum or through EMI) with interest before the maturity of the RD.
Saving is a good habit and if you have such attractive and easy to handle investment product then why not starting it immediately. Therefore, to make your future financially secure and beautiful you should start your RD now, as what it wants is commitment and for your own self you can do this bit.
