The post-office recurring deposit (PORD) is a systematic savings plan, where you save a small but finite equal sums of money each month for a period of 60 months. The savings in the PORD earn fixed interest, which can be used to accumulate sizeable and predetermined savings over time.
The capital in the PORD is completely protected, with guaranteed returns, as the scheme is backed by the Government of India.
The PORD is not inflation protected. Whenever inflation is above the guaranteed interest rate, the scheme earns no real returns. But when the inflation rate is below the guaranteed rate, it does manage a positive real return.
The interest rate is guaranteed and is currently 7.40 per cent compounded quarterly. The interest rate on this deposit will now be notified quarterly and is aligned with G-sec rates of similar maturity, with a spread of 0.25 per cent. However, it will remain unchanged for the depositor once he has made the deposit.
The PORD is liquid, despite the 60-month stipulated lock-in. The liquidity is offered in the form of withdrawals subject to conditions and penalties.
As the PORD is offered by the Government of India, it does not require any commercial rating.
Premature closing of the account is permitted with penalty.
There is no risk associated with this investment and it is completely risk-free.
There is no tax benefit on the savings or the income earned from this scheme.
Where to Open an Account
You can open the account in any post office.
How to Open an Account
- Once you have selected the location to open an account, you will need the following documents:
- An account-opening form
- Two passport size photographs
- Address and identity proof such as the Aadhaar card, passport, PAN (permanent account number) card or declaration in Form 60 or 61 as per the Income Tax Act, 1961, driving licence, voter’s identity card or ration card.
- Carry original identity proof for verification at the time of account opening.
- Choose a nominee and get a witness signature to complete the formalities and get started.
How to operate the account
- You need a pay-in slip with the initial account-opening sum to be credited to your account.
- Payment can be made in cash, by cheque, or by instructing the bank to transfer money to the PORD.
Points to Remember
- Portability of the account from one post office to another is available.
- The tenure of the account is five years.
- There is the facility of continuing the PORD for a maximum period of five years on completion of the first five-year tenure.
- The account is suspended after more than four defaults.
- Accounts with not more than four defaults in deposits can be regularised within a period of two months on payment of a default fee.
- The interest income is taxable, with no tax-deducted-at-source (TDS) certificate issued.