New Delhi, India — May 5, 2025: The Post Office Recurring Deposit (RD) Scheme remains a popular savings option for individuals seeking safe and consistent returns. However, while it may appear similar to a monthly savings piggy bank, investors must carefully understand the scheme’s terms and withdrawal rules to avoid unexpected financial losses.

Key Features of Post Office RD Scheme

• Tenure: 5 years (60 months)

• Interest Rate: 6.7% per annum (compounded quarterly)

• Deposit Mode: Fixed monthly contributions

• Account Type: Available at all India Post branches

Though the scheme offers attractive and guaranteed returns, there are strict penalties for premature closurewhich many investors overlook.

Premature Withdrawal Can Be Costly

If an investor closes their Post Office RD before maturityespecially before completing 3 years, no early withdrawal is allowed. However, after 3 years from the account opening date, premature closure is permitted — but with heavy penalties.

Instead of receiving the agreed 6.7% RD interestthe investor will only earn 4%equivalent to the Post Office Savings Account ratefor the entire investment duration.

Example:
If you invest in an RD for 5 years and break it at 3 years and 11 months, your return will be recalculated at 4%, not 6.7% — resulting in significant losses on your expected earnings.

RD Extension Rules After Maturity

Investors wishing to extend their RD beyond 5 years can do so by submitting a request to the post office. However:

• The interest rate during extension will remain the same as at the time of account opening.

• The extended account can be closed anytimebut it’s advisable to do so after completing full years (1, 2, or 3 years) to avoid a partial interest rate.

Partial-Year Closure Rule:
If the extended RD is closed in the middle of a year (e.g., after 1.5 years), interest will be paid at the RD rate (6.7%) for 1 year and only 4% (Savings Account rate) for the remaining 6 months.

What Should Investors Keep in Mind?

• Always aim to complete the full 5-year tenure to enjoy maximum returns.

• Avoid breaking the RD earlyespecially before completing 3 years.

• If planning to extend the RD after maturity, ensure the closure is timed with full-year completions for better interest earnings.

• Keep track of current savings account rates as they impact partial-year withdrawals.

Conclusion:
The Post Office RD Scheme is a safe and effective long-term savings toolbut it comes with specific rules that, if ignored, could reduce your returns. Investors are advised to read the terms carefully and plan withdrawals or extensions strategically to maximize their interest earnings.