If you’re looking for a scheme with guaranteed returns, your search ends at the Post Office. These government-guaranteed schemes offer zero risk. Among these schemes, the Post Office Recurring Deposit (RD) scheme is considered the best. It has the unprecedented potential to transform small monthly savings into a substantial corpus over a period of 5 years. Currently, this scheme offers an attractive annual interest rate of 6.7%, calculated on a monthly compounding basis. This Google Search-friendly content will explain the math behind earning crores through the magic of monthly compounding.
What is a Post Office RD
The Post Office Recurring Deposit (RD) is a monthly savings scheme. It’s best suited for those who can’t invest a large lump sum but want to build a solid fund for the future by saving a fixed amount every month.
Under this scheme, you are required to deposit a fixed amount every month for a period of 5 years (i.e., 60 months). This RD scheme currently offers an impressive annual interest rate of 6.7%. The most powerful feature of this scheme is that interest is calculated on a monthly compounding basis. This means that you earn interest not only on the principal but also on the interest earned each month, allowing your profits to grow exponentially. This is a 5-year lock-in scheme, which ensures that your savings continue to grow in a disciplined manner.
₹25,000 monthly investment yields ₹17.84 lakh
Let’s understand the financial power of this scheme with an example.
If an investor invests ₹25,000 every month in this scheme and continues this for 5 years (60 months). Your total deposit in 5 years will be ₹15,00,000 (15 lakhs). With the current interest rate of 6.7% and the benefit of monthly compounding, this ₹15 lakh investment will yield a net interest of approximately ₹2,84,148. Thus, at maturity in 5 years, the investor will receive a total return of ₹17,84,148.
Since this scheme is government-guaranteed, your impressive returns are completely free from market risks. You don’t need to start with just ₹25,000; you can build a substantial corpus with even a small amount, depending on your capacity. For example, a monthly investment of ₹10,000 yields approximately ₹7,13,659 after 5 years, and a monthly investment of ₹5,000 yields approximately ₹3,56,830.
Who can avail of this scheme
Another great advantage of the Post Office RD scheme is its accessibility. This scheme is available to every Indian citizen. Any adult Indian citizen can open this account either singly or jointly. Furthermore, parents can also open and operate this account in the name of a minor child over 10 years of age.
Investing in this scheme is very easy. You can start with a minimum amount of just ₹100 per month. Most importantly, there is no maximum investment limit in this scheme. You can choose any monthly investment amount according to your financial capacity.
Rules to keep in mind before investing
Before investing in this scheme, it is very important to be fully aware of some important rules. Plan your savings only after understanding them properly. If you need money before the 5 years, you do not need to completely break your RD plan. You can also take a loan against your deposit after one year (12 installments) from the date of opening the RD account.
Although this scheme is for five years, under special circumstances, you can prematurely close it after three years. It is important to note that every monthly installment must be deposited by the due date. A small penalty of ₹1 per ₹100 applies for late installments.
It is wise to register a nominee when opening the account. In the unfortunate event of the investor’s demise, the deposit amount and all interest are easily transferred to the nominee.