Post Office RD: Interest Rate, Rules & How It Works

A Post Office Recurring Deposit, or RD, is a 5-year savings scheme where you deposit a fixed amount every month and earn 6.7% per annum (Apr-Jun 2026 quarter), compounded quarterly. It is built for people who want to save small amounts regularly rather than invest a lump sum at once.

If you have been wondering how to build a savings habit without needing a large amount upfront, this scheme answers that directly. You commit to a monthly deposit, as low as Rs 100, and let compounding do the rest over five years.

What Is a Post Office Recurring Deposit?

It is a monthly deposit scheme run by India Post where you commit to depositing a fixed sum every month for a set tenure. Unlike a lump sum fixed deposit, an RD is designed for people whose income arrives monthly, like salaried employees or small business owners, and who want to save part of it consistently.

The tenure for the Post Office RD is fixed at 5 years. This is different from bank RDs, which often let you choose flexible tenures. Here, the structure is standard across the board.

What Is the Current Interest Rate?

For the April to June 2026 quarter, the Post Office RD earns 6.7% per annum, compounded quarterly. This means the interest you earn each quarter gets added to your balance, and future interest is calculated on this higher amount, which slightly boosts your effective returns over the 5-year term.

Like other post office schemes, this rate is reviewed every quarter by the government, so it can change when you renew or extend the account after maturity.

How Much Can You Deposit?

The minimum monthly deposit is around Rs 100, and there is no upper limit on how much you can deposit each month. Deposits must be in multiples of Rs 10, which gives you flexibility to pick an amount that fits your budget, whether that is Rs 500, Rs 2,000, or more.

This low entry point is what makes the scheme accessible. You do not need a large sum to start. You just need the discipline to deposit the chosen amount every month for five years.

Can You Extend the RD After Maturity?

Yes. Once your 5-year Post Office RD matures, you can extend it further in blocks, rather than being forced to withdraw and reinvest from scratch. This is useful if you want to keep the disciplined saving habit going without interruption, and it saves you the hassle of opening a fresh account.

What Happens If You Need to Close It Early?

Life does not always go according to plan, and the scheme accounts for that. Premature closure is allowed after 3 years of regular deposits. However, if you close early, you do not get the RD interest rate. Instead, your deposits earn interest at the post office savings account rate, which is lower.

This is an important detail to keep in mind. The 6.7% rate is meant for those who stay invested for the full tenure. Breaking it early reduces your effective earnings, so it is best used as a genuine safety valve rather than a routine option.

Can You Take a Loan Against Your RD?

Yes, and this is one of the more useful features of the scheme. After you have made 12 regular monthly installments, you become eligible for a loan against your RD balance, up to 50% of the balance at that point.

This can be handy if you face a short term cash need but do not want to break your RD and lose the higher interest rate. You continue your monthly deposits as usual while repaying the loan separately.

How Is the Interest Taxed?

Interest earned on a Post Office RD is fully taxable and gets added to your total income under “Income from Other Sources.” However, there is no TDS (Tax Deducted at Source) on post office RD interest, unlike many bank RDs where banks deduct TDS if interest crosses a certain threshold.

This does not mean the interest is tax free. It simply means you are responsible for declaring it yourself while filing your income tax return and paying tax according to your applicable slab rate.

Who Should Open a Post Office RD?

This scheme suits a particular kind of saver more than others:

• Salaried individuals who want to set aside a fixed amount from every paycheck without thinking about it.
• People building a saving habit for the first time, since the fixed monthly commitment creates discipline.
• Parents saving for a child’s future goal, like school admission or a small milestone expense, five years down the line.
• Conservative savers who prefer a government backed, predictable scheme over market linked SIPs, even if returns are more modest.

It is not meant for lump sum investors. If you already have a large amount ready to invest, a Post Office Time Deposit or another lump sum option may serve you better, since RDs are structured around monthly contributions, not one time deposits.

Post Office RD vs Bank RD

Here is a quick comparison to help you decide between the two:

Feature	Post Office RD	Typical Bank RD
Tenure	Fixed at 5 years	Flexible, often 6 months to 10 years
Interest rate	6.7% p.a. (Apr-Jun 2026), compounded quarterly	Varies by bank
Minimum deposit	Around Rs 100, multiples of Rs 10	Varies, often Rs 100 to Rs 1,000
Premature closure	Allowed after 3 years, at reduced rate	Usually allowed with penalty, varies by bank
Loan facility	Up to 50% of balance after 12 installments	Available at some banks
TDS	Not deducted	Deducted above threshold at some banks

The Post Office RD stands out for its accessibility and predictable structure, especially in areas where banking options are limited.

The Bottom Line

A Post Office Recurring Deposit works best when you treat it as a long term commitment rather than a place to park spare cash occasionally. The fixed 5-year tenure, decent interest rate, and loan facility against your balance make it a solid option for building a consistent saving habit, especially if you are new to structured saving or prefer government backed schemes over market linked ones. Just remember that breaking it early costs you the higher interest rate, so plan your monthly deposit amount realistically before you start.

Key takeaways

• Post Office RD has a fixed 5-year tenure and currently earns 6.7% per annum (Apr-Jun 2026 quarter), compounded quarterly.
• Minimum monthly deposit is around Rs 100, in multiples of Rs 10, with no upper limit.
• The account can be extended in blocks after maturity, letting you continue the saving habit seamlessly.
• Premature closure is allowed after 3 years, but interest drops to the savings account rate instead of the RD rate.
• A loan of up to 50% of the RD balance is available after 12 regular monthly installments.
• Interest is fully taxable, though there is no TDS deducted on post office RD interest.
• Best suited for disciplined monthly savers rather than people looking to invest a lump sum.

FAQs

What is the minimum amount to open a Post Office RD?
You can start with as little as Rs 100 per month, and deposits must be in multiples of Rs 10 after that. There is no maximum limit, so you can deposit more depending on your monthly budget and savings goals.

Can I withdraw my Post Office RD before 5 years?
Yes, premature closure is allowed after you have completed 3 years of deposits. However, your interest rate drops to the post office savings account rate instead of the higher RD rate, so early closure reduces your overall returns.

Does Post Office RD deduct TDS on interest?
No, post office RDs do not have TDS deducted on the interest earned, unlike some bank RDs. You are still required to declare this interest as taxable income and pay tax according to your income slab when filing returns.

Can I take a loan against my Post Office RD?
Yes, once you have made 12 regular monthly installments, you can take a loan against your RD balance, up to 50% of the accumulated amount. This lets you handle short term cash needs without breaking your RD and losing the higher interest rate.

What happens if I miss a monthly deposit in my Post Office RD?
Missing deposits typically attracts a small default fee per missed installment, and the account can be discontinued if defaults continue for too long. It is best to plan a monthly amount you can consistently manage over the full 5-year tenure.

Is Post Office RD better than a bank RD?
It depends on your priorities. Post Office RD offers strong accessibility, a government backing, and no TDS, while bank RDs often offer more flexible tenures. If predictable, government backed saving matters more to you than tenure flexibility, the post office option is a solid choice.