Post Office RD Scheme: Interest Rate, Rules & Tax (2026)

India has 1.6 lakh post offices. More than any bank in the country. In towns where a private bank branch does not exist, the post office does — and it has been handling savings for those communities for over a century.

Post Office RD — Recurring Deposit — is a government-backed scheme where a fixed amount is deposited monthly for five years and earns compound interest on the balance. Official name: National Savings Recurring Deposit Account. Administered by the Department of Posts under the Ministry of Finance.

Current rate: 6.7% per annum, compounded quarterly. Ministry of Finance notification, March 30, 2026. Unchanged through all four quarters of FY 2025–26.

KEY TAKEAWAYS

1.  RD is Recurring Deposit. Monthly savings scheme, government-backed, five-year tenure

2.  Rate: 6.7% p.a., compounded quarterly. Locks in on the day of opening — does not change for the full five years, regardless of future quarterly revisions

3.  ₹100 to start. No upper limit

4.  Interest is taxable. Section 80C benefit does not apply to Post Office RD — a point most investors get wrong

5.  After 12 deposits, up to 50% of the balance can be borrowed against the account at simple interest

What Is RD? Full Form and What It Actually Means

RD stands for Recurring Deposit. Most people know that. What fewer people know is that the post office version has an official name — the National Savings Recurring Deposit Account — and is administered by the Department of Posts under the Ministry of Finance, not a commercial bank.

The core idea is simple enough. A fixed amount goes in every month. The post office pays compound interest on it. At the end of five years, the depositor gets back the principal and all the interest it has earned.

What makes it different from a fixed deposit is the entry point. An FD asks for a lump sum upfront. An RD works in monthly instalments. For someone saving from a salary or household income, that distinction matters quite a bit.

The scheme has been around for decades. Its popularity has not faded — especially in smaller towns and rural areas, where the post office is still the most accessible and most trusted place to put money.

Post Office RD Interest Rate in 2026

6.7% per annum. Compounded quarterly.

That rate has held steady through all of FY 2025–26, and the Ministry of Finance carried it forward into the April–June 2026 quarter. The announcement came on March 30, 2026. Next review is June 30, 2026.

Here is the part worth paying attention to. The rate at account opening is the rate for the full five years. Future quarterly revisions affect only new accounts — not existing ones. So opening an account when rates are stable locks in that return regardless of what changes later. That kind of certainty is harder to find than it sounds.

Who Can Open a Post Office RD Account

Most adult Indian residents qualify. Minors above 10 can open and independently operate their own accounts. Below 10, a parent or guardian opens it on the child's behalf.

Joint accounts are allowed — up to three adults on a single account. NRIs are not eligible.

No cap on the number of accounts. Someone saving for three separate goals can open three separate RDs without any restriction.

How to Open a Post Office RD Account

One visit to the nearest post office. That is it.

At the Post Office

1. Ask for Form-1 at the counter
2. Fill it in — name, nominee, monthly deposit amount
3. Attach identity and address proof: Aadhaar, PAN, Voter ID, or Passport
4. Add a passport-size photograph
5. Make the first deposit — minimum ₹100, in multiples of ₹10
6. Collect the passbook — the primary account record

Online — Via IPPB or DOP Net Banking

1. Log in to the India Post Payments Bank app or DOP Internet Banking portal
2. Navigate to the Recurring Deposit section
3. Select the monthly amount and confirm the five-year tenure
4. Link the postal savings account for monthly auto-debit
5. Download or collect the passbook

How the Maturity Corpus Grows

Compounding quarterly means interest earned in one quarter starts earning interest in the next. It does not look dramatic in year one. By year five, the accumulated difference becomes real.

A monthly deposit of ₹500, held for five years at 6.7%, grows to roughly ₹35,400 at maturity. The total deposited is ₹30,000. The extra ₹5,400 comes entirely from quarterly compounding.

Not a spectacular return. But it is guaranteed. Government-backed. And it requires nothing beyond depositing ₹500 every month — something that works even on a modest income, which is exactly why this scheme has outlasted dozens of supposedly smarter alternatives.

Post Office RD — At a Glance

Key features, simply listed.

Source: Department of Posts, Ministry of Finance, Government of India

The Tax Rules — Straightforward, but Often Misread

Straightforward first: interest earned on Post Office RD is fully taxable. Goes into the income tax return under 'Income from Other Sources' and is taxed per the applicable slab. No special treatment, no exemption.

Now the part that trips people up.

⚠️  Common Misconception

• Post Office RD is frequently assumed to carry a Section 80C deduction benefit. It does not. 

• The scheme that qualifies is the 5-year Post Office Time Deposit — a different product entirely.

• The Recurring Deposit has no 80C benefit under the Income Tax Act 2025 (Clause 123).

No TDS is deducted at source. The interest arrives untouched — but the liability exists. Investors factoring this into annual planning can run the numbers through the Shriram Life Income Tax Calculator.

Premature Closure and the Loan Option

The five-year tenure is fixed but not final.

After three years, the account can be closed early. The interest rate drops to the Post Office Savings Account rate — lower than what the RD would have paid. So early exit has a cost, but the option is there.

The loan facility is less talked about. After 12 consecutive monthly deposits, up to 50% of the balance can be borrowed at simple interest — 2% above the applicable RD rate. Repayment can be a lump sum or in monthly instalments.

The account keeps earning interest on the full balance while the loan runs. Not many people know this exists, which is a shame — it makes the RD genuinely useful as both a savings tool and a liquidity buffer.

Post Office RD and Life Insurance — A Note on What Each Does

A recurring deposit builds a corpus. It is good at that. Disciplined, predictable, no market exposure.

What it does not do is protect the goal itself.

If the person depositing ₹500 every month passes away in year three, the RD stops. The family gets whatever was deposited. The goal — a child's education fund, a house down payment, a retirement cushion — goes unfinished.

That is the gap life insurance savings plans fill. Not as a replacement for the RD, but as a layer alongside it. A plan that keeps moving toward the goal even if the earning member cannot. Many Indian households quietly run both — a post office RD for a near-term target, and a life insurance plan for longer-horizon goals that cannot afford to be derailed.

For those still mapping the goal itself, the Savings Calculator helps put a number on it.

The Post Office RD works. It has worked for decades and keeps working for anyone willing to show up every month with a fixed amount. Government-backed, no market risk, available from a village post office in Bihar to a city branch in Bengaluru.

The savings habit it builds is worth as much as the interest it pays.

For those ready to add the second layer — the one that keeps the goal alive regardless of what life brings — Shriram Life's savings plans are worth looking at.