Post office RD: Do you know the penalty for skipping installments?

Recurring Deposit schemes of post office are among the popular investment options. It is generally preferred by conservative investors. You can use post office RD as a piggy bank for savings where you can invest a fixed amount every month and gets the lump sum amount on maturity. They have a maturity period of 5 years that can be extended for five more years. The minimum monthly deposit is Rs 100 and thereafter one can deposit in multiples of Rs 10. However, there is no maximum deposit limit. Post office RD currently offers 5.8% compound annual interest, but the interest rates applicable to all post office saving schemes are reviewed on a quarterly basis. The interest received is fully taxable.

In case the account was opened in the first 15 days of the month, you need to deposit the amount till the 15th of the month. In case the account was opened after that the amount has to be deposited before the last date of the month. However, if you are planning to invest in recurring deposits, you should know the penalties as well in case you miss on monthly installments.

Penalty 

If the amount is not deposited within the prescribed time, the account is considered defaulted and is deactivated. To reactivate the account, you have to pay Re 1 for every Rs 100 to be deposited as a penalty, along with the outstanding amount to be deposited.

The account can be reactivated for two months after four regular defaults. If the account is not revived within this period, it becomes discontinued and no further deposit can be made.

If there are less than four defaults you can extend the maturity period by the same number of months of your choice.

Other things you should know 

— A depositor can have more than one RD account in his own name or jointly with another.

— You can also take a loan on RD at the rate of 2% plus the rate of interest on RD. Loan up to 50% of the balance allowed after one year.

— The RD account can be closed prematurely after 3 years after the opening of the account. However, in case of premature closure, you will get the interest only equivalent to the post office savings account.

— The minimum period of deposit starts at 6 months and can go up to 10 years.