Post Office Recurring Deposit (RD) Explained: Rate, Maturity, and Rules

The National Savings Recurring Deposit Account — the Post Office RD — is India’s government-backed monthly savings scheme: fixed deposits every month, for five years, at a rate the government notifies each quarter, compounded quarterly. It is distinct from a bank RD, which sets its own rates and tenures, and from the general RD formula, which this guide’s companion article covers. This article covers the Post Office scheme only: the current notified rate, the deposit rules, how maturity is calculated, early closure, loans, and tax. For the general formula and bank RDs, see the companion explainer linked below.

The scheme: what the Post Office RD is

The Post Office RD is a National Savings Scheme operated by India Post under the National Savings Recurring Deposit Account rules. An individual, joint holders (up to three adults), a guardian on behalf of a minor, or a minor above 10 years can open an account, and there is no limit on the number of accounts a person may hold. The scheme is government-backed: the deposits are sovereign savings, not bank deposits, and the rate is set by government notification rather than by a bank’s asset-liability committee.

The defining features are fixed monthly deposits and a fixed tenure. The depositor commits to one monthly amount, paid every month for 60 months. The amount can be increased or decreased only by opening a separate account or under the scheme’s variation rules — the monthly instalment of an existing account is fixed. That rigidity is the point: the scheme is designed for small, regular saving, starting at ₹100 a month, and its discipline is its return. A bank RD, by contrast, typically offers tenures from 6 months to 10 years and rates that vary by bank and tenure.

This article is about the Post Office scheme as notified for the October–December 2026 quarter. Rates for small savings schemes are reviewed quarterly, and the RD rate has been 6.7% across recent quarters — but “recent” is not “permanent.” The rate that applies to an account is the notified rate in force during each quarter of its life, and a change mid-tenure changes the maturity. Check the current notification on the India Post or Department of Economic Affairs savings-schemes pages before opening an account or quoting a maturity figure.

Rate, deposits, and tenure

The current rate is 6.7% per annum, compounded quarterly, for the October–December 2026 quarter. Compounding quarterly means interest is calculated on the balance each quarter, and the interest itself earns interest in later quarters. The minimum monthly deposit is ₹100, and further deposits must be in multiples of ₹10. There is no maximum monthly deposit and no maximum balance. Deposits are due each month, and a missed instalment attracts a default fee under the scheme rules and can affect the maturity if not regularised — pay on time, every month, and keep the passbook updated.

The standard tenure is 5 years — 60 monthly instalments. On maturity the account can be closed and the maturity amount paid, or the account may be extended for a further period of 5 years under the scheme rules, continuing at the rate notified for the extension period. Extension is not automatic in the sense of being free: it follows the scheme’s procedure, and the rate during the extension is whatever is notified then, not the rate at opening. Anyone planning an extension should confirm the procedure at the post office before maturity, not after.

A note on the rate’s history helps set expectations. Small-savings rates are linked to government security yields with a spread, and they move — sometimes by 10–20 basis points a quarter, sometimes not at all. An RD opened when the rate was higher does not keep that rate for its whole life if the notification changes; the applicable rate follows the notifications in force. The maturity examples in this guide are computed at 6.7% throughout, and are illustrations at a stated rate, not guarantees. The RD Calculator takes any rate you enter, so re-running it at a changed rate shows the effect immediately.

How maturity is calculated, with worked examples

Maturity follows the quarterly-compounding RD formula. With i the quarterly rate (annual rate ÷ 4) and n the number of quarters, the maturity value is M = R × ((1 + i)ⁿ − 1) ÷ (1 − (1 + i)^(−1/3)), where R is the monthly deposit. The (1/3) exponent appears because deposits are monthly while compounding is quarterly: each month’s deposit earns interest for a different fraction of the quarter. The formula is the standard one for Indian RDs, and the calculator on this site applies it — the worked examples below are computed with it, at 6.7%, and rounded to the nearest rupee.

Worked example 1: ₹5,000 a month for 5 years at 6.7%. Total deposited: ₹300,000. Maturity value: about ₹356,829. Interest earned: about ₹56,829. Worked example 2: ₹1,000 a month for 5 years at 6.7%. Total deposited: ₹60,000. Maturity value: about ₹71,366. Interest earned: about ₹11,366. The ratio is exact: five times the deposit gives five times the maturity, because the formula is linear in R. Double the monthly deposit and the maturity doubles; extend the tenure and the growth is faster than linear, because later deposits compound for longer.

The formula also explains why the first instalments matter most. The first month’s ₹5,000 compounds for the full five years; the last month’s ₹5,000 earns almost no interest. That timing difference is why an RD’s maturity cannot be computed as “total deposit × interest rate × years,” and why a lump sum invested for five years at the same rate would earn more than the same total dripped in monthly. The RD’s return is the price of the discipline of monthly saving, and it should be compared with other monthly-saving options, not with lump-sum investments.

Computed with the quarterly-compounding RD formula at 6.7% throughout; actual payout follows the scheme rules and rounding in force.

Early closure, loans, and tax

Premature closure is allowed only after 3 years (36 months) from opening. If closed early, the account does not earn the RD rate: it earns interest at the Post Office Savings Account rate (currently 4.0% per annum) under the scheme rules, which sharply reduces the payout. The 3-year bar and the rate drop together make the RD a poor vehicle for money that may be needed soon. Money that might be needed within three years belongs in a more liquid account, even at a lower headline rate.

After 12 monthly instalments, the account holder may take a loan of up to 50% of the balance, repayable with interest under the scheme rules. The loan is a facility against the RD, not a withdrawal: the deposits continue, and the loan is repaid separately. The exact interest and repayment terms follow the scheme rules in force and should be confirmed at the post office. The loan facility is one reason the RD suits savers who want discipline with a safety valve — but it is a loan, with a cost, and using it routinely defeats the saving.

Tax treatment is straightforward and unfavourable to anyone expecting a deduction. There is no tax benefit under section 80C for RD deposits. Interest earned is fully taxable as income from other sources, added to the depositor’s income and taxed at the applicable slab rate. Tax is deducted at source (TDS) where the interest exceeds the prescribed threshold for the year, and the depositor reports the full interest in the return. The maturity figure in this guide is pre-tax; the after-tax return depends on the depositor’s slab. For the general RD formula, bank RD comparison, and the difference between RD, fixed deposit, and SIP, see the companion article on Recurring Deposits Explained, which covers the general case this scheme-specific guide deliberately does not repeat.

Post Office RD versus a bank RD

The choice between a Post Office RD and a bank RD turns on four differences. Tenure: the Post Office RD is fixed at 5 years (extendable); a bank RD offers 6 months to 10 years, and sometimes longer. Rate: the Post Office rate is government-notified quarterly and uniform across the country; bank rates vary by bank, tenure, and customer category, and senior citizens typically earn more. Access: the Post Office scheme allows premature closure only after 3 years at the savings rate; banks generally allow premature closure with a penalty of 0.5–1 percentage point, varying by bank. And backing: the Post Office scheme is sovereign savings; bank deposits are covered by deposit insurance up to ₹5 lakh per depositor per bank.

Neither is universally better. The Post Office RD suits a saver who wants a fixed 5-year discipline, a government-backed rate, and a very low entry point of ₹100 a month, and who will not need the money for five years. A bank RD suits a saver who wants a chosen tenure, a possibly higher rate for a short period, or the flexibility of premature closure with a penalty. Compare on the rate for the tenure you actually need, the premature-closure terms, and the tax treatment — which is the same for both, since RD interest is taxable in either case. Run both at their actual rates in the calculator before deciding, and re-run if a notification changes the Post Office rate.

Opening an account: where, how, and what to keep

An RD account is opened at a post office, in person, with the account opening form, identity and address proof under the know-your-customer rules, and the first monthly deposit. The depositor chooses the monthly amount at opening — in multiples of ₹10, starting at ₹100 — and that amount is the instalment for the account’s life. Joint accounts are permitted for up to three adults, a guardian may open for a minor, and a minor above 10 years may open in their own name. There is no limit on the number of accounts, so a saver who wants two different monthly amounts opens two accounts rather than varying one.

Nomination should be made at opening, not left for later. The nominee receives the maturity or closure amount if the depositor dies, without the delays of succession proceedings, and the nomination can be changed during the account’s life. The passbook is the record: deposits are entered in it, and it should be updated at every deposit, because the passbook, not the depositor’s memory, is what a dispute about a missed instalment will be settled from. Keep the passbook with the same care as the account itself, and keep a note of the account number, the monthly amount, and the maturity date separately, where it can be found if the passbook is lost.

Deposits are due monthly, and the discipline of paying on time is part of the return: a missed instalment attracts a default fee under the scheme rules, and irregular payment complicates the maturity. Standing instructions from a Post Office savings account, where available, remove the monthly decision and the monthly risk of forgetting. If a deposit will be missed — travel, illness, a tight month — pay in advance where the scheme allows, or regularise the default promptly on return, and confirm at the counter that the account is in good standing. The RD rewards the saver who treats the instalment like a bill: fixed, monthly, and non-negotiable.

Frequently asked questions