The Post Office RD (Recurring Deposit) scheme is one of the most trusted savings options in India, backed by the Government of India. It allows investors to deposit a fixed amount every month and receive a guaranteed return with quarterly compounding. Many people are curious about claims that an investment of ₹10,000 per month can yield ₹7,13,643 in 5 years. Let’s understand how the scheme actually works and what realistic returns you can expect.
What is Post Office RD Scheme
The Post Office Recurring Deposit is a small savings plan where you invest a fixed amount every month for 5 years. The money earns interest at a fixed rate determined by the government, which is compounded every quarter. It’s ideal for people who want to save regularly and earn steady returns with almost no risk. The RD account can be opened at any post office branch with a minimum of ₹100 per month, and there’s no upper limit.
Current Interest Rate
As of 2025, the interest rate on the Post Office RD scheme is 6.7% per annum, compounded quarterly. This means your money grows slightly faster than simple interest because interest is added every three months and itself earns further interest. The rate is reviewed every quarter by the Ministry of Finance.
How Returns Are Calculated
When you deposit ₹10,000 every month for 5 years, you will make a total investment of ₹6,00,000. The Post Office calculates the interest quarterly, and your total maturity value depends on how much compound interest you earn over time.
At 6.7% per annum with quarterly compounding, your maturity value after 5 years would be around ₹7,13,643. This means your total interest earned would be approximately ₹1,13,643 over your total deposits. So yes, if you deposit ₹10,000 per month continuously for 5 years, you will receive around ₹7,13,643 at maturity.
Example Calculation
- Monthly Deposit: ₹10,000
- Tenure: 5 years (60 months)
- Total Investment: ₹6,00,000
- Interest Rate: 6.7% per annum (compounded quarterly)
- Maturity Value: Approximately ₹7,13,643
The maturity amount includes both the principal and the interest accumulated over the entire period.
Key Features of Post Office RD Scheme
- Tenure: The standard tenure is 5 years, extendable in blocks of 5 years.
- Deposit Flexibility: You can invest from ₹100 per month onwards in multiples of ₹10.
- Compounding: Interest is compounded every quarter, increasing your returns.
- Premature Withdrawal: Allowed after 3 years with certain deductions.
- Loan Facility: You can avail a loan up to 50% of your deposit amount after 1 year.
- Nomination: The account allows nomination so your savings are secure for your family.
Benefits of Investing in Post Office RD
- Guaranteed Returns: Since it’s a government-backed scheme, there is zero risk of loss.
- Better Than Normal Savings: The 6.7% interest rate is higher than most savings accounts.
- Safe for Long-Term Goals: Suitable for short- and medium-term financial planning like children’s education or family expenses.
- Easy Accessibility: Can be opened at any post office, with online access now available in many branches.
Comparison with Bank RD
Compared to bank RDs, the Post Office RD offers more stability as its rates are reviewed quarterly by the government and do not fluctuate wildly. Many banks offer around 6.5% on recurring deposits, making the Post Office RD equally or slightly more attractive.
Taxation
Interest earned from a Post Office RD is taxable under “Income from Other Sources” as per your income tax slab. However, if your total annual interest is below ₹40,000, no TDS is deducted. The scheme does not offer Section 80C benefits for the deposit amount.
Final Words
Investing ₹10,000 per month in the Post Office RD for 5 years is a safe and effective way to build disciplined savings. With the current 6.7% annual interest rate, your total investment of ₹6,00,000 can grow to around ₹7,13,643 at maturity. This plan is perfect for those who prefer steady returns, guaranteed safety, and government-backed reliability without the volatility of the stock market.
