New Delhi:
The Post Office offers several savings schemes similar to those provided by banks. One such scheme is the Post Office Recurring Deposit (RD).
This scheme functions like a piggy bank where you deposit a fixed amount monthly and receive the amount with interest upon maturity.
The term for a Post Office RD is 5 years, and it currently offers an interest rate of 6.7%.
How the Interest Works
Interest on the Post Office RD is calculated quarterly. The more you deposit, the more interest you accumulate.
For instance, to accumulate up to Rs 12 lakh, you need to deposit Rs 7000 every month. Here’s how you can achieve this goal:
Accumulating Big Money
If you invest Rs 7000 each month in this scheme, your total investment in 5 years will be Rs 4,20,000.
With an interest rate of 6.7%, you will earn Rs 79,564 in interest over these 5 years. This means your maturity amount will be Rs 4,99,564, approximately Rs 5 lakh.
To reach Rs 12 lakh, you need to extend the RD for another 5 years, making it a total of 10 years. Over 10 years, your total investment will be Rs 8,40,000.
At the same interest rate, you will earn Rs 3,55,982 in interest, bringing your maturity amount to Rs 11,95,982, nearly Rs 12 lakh.
Extending Your RD
To extend your Post Office RD, you must apply at the concerned post office.
The interest rate applicable on the extended account will be the same as the rate when the account was originally opened.
You can close the extended account at any time during the extension period.
If you withdraw money within a period of less than a full year, the interest rate of the Post Office Savings Account will apply.
For example, if you withdraw funds from an extended account after 3 years and 6 months, you will receive 6.7% interest for the first three years, and for the remaining 6 months, the post office savings account interest rate of 4% will apply.
To accumulate Rs 12 lakh from the Post Office RD, you must consistently invest Rs 7000 for the entire extended period of 5 years.
By understanding and utilizing this scheme effectively, you can turn your regular deposits into a substantial savings fund over time.
