Post Office FD vs RD: Which can offer higher returns on Rs 10,00,000 investment in 5 years?
Post Office FD and RD are common savings schemes. FD offers lump sum investment returns with a fixed interest rate, while RD allows monthly deposits for systematic savings. Compare their 5-year returns.
Post Office Fixed Deposit (FD) and Recurring Deposit (RD) are secure investment schemes backed by the Government of India. FD allows a lump sum investment with fixed interest rates, providing stable returns over a chosen tenure. RD, on the other hand, is ideal for disciplined savers, requiring monthly deposits with interest compounded quarterly. Both schemes offer flexible tenures and cater to different financial goals. Here's a detailed comparison of returns on an investment of Rs 10 lakh over 5 years.
(Disclaimer: This is an not investment advice. Do your own due diligence or consult an expert for financial planning)
Overview of Post Office FD (Time Deposit)
- Fixed Deposit (FD) offers a guaranteed return on a lump sum investment for a specific tenure.
- Interest rates are higher for longer tenures, providing a stable investment option.
Key Features of FD Scheme
- Interest Rate: 7.5% annually for 5 years, calculated quarterly.
- Eligibility: Open to individuals, minors, and guardians on behalf of minors.
- Investment Limit: Minimum Rs 1,000, no maximum limit.
FD Benefits and Maturity Details
- Annual interest can be credited directly to a savings account.
- Investments under 5 years qualify for tax benefits under Section 80C.
- Flexible tenure options: 1, 2, 3, and 5 years.
Premature Withdrawal Terms for FD
- Withdrawal before 6 months is not allowed.
- After 6 months, reduced interest rates apply: savings account rates for withdrawals before 1 year and 2% less than applicable FD rates after 1 year.
Return on FD Investment
- Principal: Rs 10,00,000
- Interest Earned: Rs 4,49,948
- Total Maturity Value: Rs 14,49,948
Overview of Post Office RD (Recurring Deposit)
Recurring Deposit (RD) involves monthly deposits for a fixed tenure with compounded returns.
Suitable for systematic savings.
Key Features of RD Scheme
- Interest Rate: 6.7% per annum, compounded quarterly.
- Eligibility: Open to individuals, minors, and guardians.
- Investment Limit: Minimum Rs 100 per month, no maximum limit.
RD Deposit and Default Policies
- Monthly deposits due by the 15th or last working day, depending on the account opening date.
- Defaults incur nominal penalties. Accounts with up to 4 defaults can be revived.
Loan and Premature Closure Options for RD
- Loan up to 50% of the account balance available after 12 installments.
- Premature closure allowed after 3 years with savings account interest rates applied.
Return on RD Investment
- Monthly Deposit: Rs 16,663
- Principal: Rs 9,99,780
- Interest Earned: Rs 1,89,392
- Total Maturity Value: Rs 11,89,172