Stop at 5 years or keep going to 10
When the RD matures, the post office lets you extend it for another 5 years at the rate you started with. If Hiren manages the class 11 fees from his salary, he could leave the ₹2,000 running for his daughter's college. At 6.7%, 120 months come to about ₹3,41,709. He would deposit ₹2,40,000 and the interest would be ₹1,01,709.
That is the real gain from waiting. The deposits only double, but the interest grows from ₹22,732 to ₹1,01,709, about 4.5 times. If the fees must come from the RD, though, he takes the ₹1,42,732 at 5 years. A fresh RD opened later gets whatever rate is current then, which may be higher or lower.
Frequently asked questions
What is the maturity of a ₹2,000 post office RD after 5 years?
About ₹1,42,732 at 6.7% a year, compounded every quarter. You pay 60 instalments of ₹2,000, so ₹1,20,000 is your money and ₹22,732 is interest. The rate for new accounts is reset every quarter.
What is the penalty for a missed ₹2,000 instalment?
A default fee of ₹1 for every ₹100, which is ₹20 for each month you miss, paid along with the missed instalment. Miss 4 instalments and the account is discontinued, unless you revive it within 2 months.
Can I get money from the RD if the fees come early?
After 12 instalments you can take a loan of up to half the balance, at 2% above the RD rate, so 8.7% today. After 24 instalments of ₹2,000 that is around ₹24,000, half of the ₹48,000 deposited. Closing the account is allowed only after 3 years, and then interest drops to the post office savings rate.
Is a bank RD better than the post office for ₹2,000 a month?
Bank RDs for 5 years mostly pay around 6 to 7% now. That would give ₹1,40,127 to ₹1,43,866 after 5 years, so the gap from the post office's ₹1,42,732 is small. These rates are only examples. A bank RD lets you pick the tenure, the post office one is fixed at 5 years. Interest on both is taxed at your slab.
