There is a risk factor associated with any investment. In such a situation, you want to invest in a place where your money is secure and you get good returns. The risk is high in the equity market, so the returns are also higher than other investment products. But not everyone has the ability to take risks. Therefore, if you want an investment where there is good profit also, then post office schemes are good for you.
Post office small savings plans can be the best option for people looking for safe investment options. The risk factor is low in this and the returns are also good.
Post Office RD Deposit Account is a government-guaranteed scheme of depositing small instalments with better interest rates. In this, you can start investing with a small amount of just Rs 100. There is no maximum investment limit, you can invest as much money as you want.
The account for this scheme is opened for five years. However, banks offer the facility of recurring deposit accounts for six months, 1 year, 2 years, 3 years. Interest is calculated every quarter (at an annual rate) on the deposited money and it is added (including compound interest) to your account at the end of every quarter.
At present, the interest of 5.8% can be availed on Recurring Deposit Scheme, this new rate is applicable from 1st April 2020. The Government of India fixes the interest rates of all its small savings schemes every quarter.
If you invest Rs 10,000 every month in the post office RD scheme for 10 years, you will get more than Rs 16 lakh after 10 years at the rate of 5.8%.
It may be noted that you will have to keep depositing money in the account regularly, if you do not deposit the money then you will have to pay a penalty of one per cent every month. Your account is closed after 4 instalments are missed.
TDS is deducted on investment in recurring deposits, if the deposit exceeds Rs 40,000 then tax is levied at the rate of 10% per annum. Interest earned on RD is also taxable, but the entire maturity amount is not taxed. Investors who do not have any taxable income can claim TDS exemption by filing Form 15G, as is the case with FDs.
