5 years RD Interest Rate

Understand how much you can earn if you invest in RD for 5 years.
RD Interest Rates
3 min
14-April-2024

An RD is an investment product offered by banks, non-banking financial companies (NBFCs), and post offices to individuals earning regular income. In this type of investment, a fixed amount is deposited into the recurring deposit account every month for a fixed tenure. As of 01-01-2024, the 5-year RD interest in the post office is 6.70% per annum. Post office RD interest rates for 5 years are highly lucrative for individuals looking to invest their savings for medium-term goals.

RD interest rates - Overview

Recurring deposits are similar to fixed deposit, with the difference being the flexibility of making monthly instalment payments. The RD interest rates currently range from 2.50%-8.50% p.a., while 5-year recurring deposits in the post office offer attractive interest rates of 6.7% p.a.

Particulars

Details

Interest rate range

2.5% to 8.5% p.a.

Minimum deposit amount

Rs. 100 per month

Investment tenure

6 months to 10 years

Interest compound frequency

Quarterly

Partial withdrawal

Not allowed

Premature closure

Allowed with penalty

 

Types of recurring deposit interest rates

  1. Regular savings scheme: Banks in India offer recurring deposits on regular savings accounts with interest rates ranging from 2.75% to 7.5% p.a.
  2. Junior RD scheme: Many banks provide recurring deposit schemes for children. The interest is either equivalent to the regular RD or higher.
  3. Senior citizens RD scheme: Financial institutions provide higher interest rates to senior citizens. They usually provide interest rates ranging from 3.25% to 7.50%, which is 0.50% per annum over the prevailing interest rate.
  4. NRE/NRO RD scheme: Non-Resident External (NRE) and Non-Resident Ordinary (NRO) schemes are intended for Indians who reside abroad or hold an NRI status. These schemes offer lower recurring deposit interest rates. Senior citizens holding NRE/NRO accounts are not offered additional interest.
  5. Special RD schemes: Some banks offer special RD schemes with unique benefits and features, such as higher interest rates, flexible tenures, free insurance coverage, and loan facilities.

Also Read: How to Update KYC for EPF UAN

Benefits of RD interest rates

  1. Recurring deposits are a safe form of investment and carry little to no risk since the interest rates do not fluctuate.
  2. With recurring deposits, you earn interest from your first contribution and the interest accumulated increases throughout your tenure. The longer you invest, the more interest you earn.
  3. At the end of the recurring deposit tenure, you receive a lump sum payout, which includes your contribution and the interest earned.
  4. Most financial instituion provide Internet banking services to open deposits, access your accounts, check the returns of your deposit and view the interest rates for each tenure.

Factors that can affect recurring deposit interest rates

  1. The kind of account you hold can be a deciding factor for your interest rate. Regular savings accounts offer higher interest rates than NRO or NRE accounts.
  2. The tenure of the deposit is a crucial factor in determining your RD interest rate. Medium-term deposits often earn higher interest rates. Some banks offer the highest interest rates on 10-year long-term deposits.
  3. Many banks offer a higher rate of interest for senior citizens and junior accounts.

Eligibility criteria to apply for RD

The following are the eligibility criteria to apply for an RD account:

  • You must have an savings account.
  • Minors less than 10 years of age must be accompanied by a legal guardian.
  • An RD account can be set up by a government organisation.
  • A corporate, commercial organisation, proprietorship, or company can also open an RD account.

Also Read: How to Activate Your UAN Number

Documents required to apply for RD 

The following are the documents required to open an RD account:

Proof of identity

  • PAN card
  • Voter ID card
  • Passport
  • Ration card
  • Senior citizen ID card
  • Driving license

Proof of address

  • Electricity bill
  • Telephone bill
  • Passport
  • ID card or any certificate issued by the post office
  • Bank statement with cheque

How is the interest under the recurring deposit scheme calculated?

The formula to calculate interest on recurring deposits is as follows:

M = R [(1+i) n – 1]/ 1 – (1+i) -1/3

Where:

M = maturity value

R = monthly instalment

n = number of quarters

i = rate of interest/400

Tax on recurring deposit interest rates

The interests you earn on recurring deposit investments are subject to 10% TDS deductions. If your PAN information is not provided, the investment amount is subject to 20% TDS deductions. The TDS can differ based on your, annual income and the interest you accrue on your RD amount.

Conclusion

Recurring deposits are an ideal choice for people who want to invest small amounts every month and receive a high rate of return. Post office RD interest rates for 5 years are lucrative, becoming the preferred choice for earning interest compared.

Fixed deposits also provide a safe avenue to grow your corpus. Corporate FDs, such as a Bajaj Finance FD, offer attractive interest rates. For example, the Bajaj Finance FD offers interest rates up to 8.85% p.a., along with flexible tenures and payout options, making it an enticing option for parking your corpus.

Calculate your expected investment returns with the help of our investment calculators

Investment Calculator
Systematic Investment Plan Calculator Fixed Deposit calculator SDP calculator Gratuity Calculator EPF Calculator Brokerage Calculator
Lumpsum Calculator Step Up SIP Calculator Sukanya Samriddhi Yojana Calculator Public Provident Fund Calculator RD Calculator MF calculator

Disclaimer

As regards deposit taking activity of Bajaj Finance Ltd (BFL), the viewers may refer to the advertisement in the Indian Express (Mumbai Edition) and Loksatta (Pune Edition) furnished in the application form for soliciting public deposits or refer https://www.bajajfinserv.in/fixed-deposit-archives
The company is having a valid Certificate of Registration dated March 5, 1998 issued by the Reserve Bank of India under section 45 IA of the Reserve Bank of India Act, 1934. However, the RBI does not accept any responsibility or guarantee about the present position as to the financial soundness of the company or for the correctness of any of the statements or representations made or opinions expressed by the company and for repayment of deposits/discharge of the liabilities by the company.

For the FD calculator the actual returns may vary slightly if the Fixed Deposit tenure includes a leap year.