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Recurring Deposit Taxes & Fixed Deposit Taxes – How do they work? (RD & FD)

Last updated: October 31, 2019 | by

I am sure most of us might have heard about one of the popular savings tool called Recurring Deposit (RD). Infact most of us might have started the investment plan with an investment in RD or Fixed Deposit (FD). These are excellent investment/saving tools to accumulate a corpus for short term goals like creating an emergency fund, creating a corpus to meet Kid’s yearly education fees, saving for big time purchases like LED TV etc., They are safe and provide guaranteed returns.

Financial products like RDs and FDs are very simple to understand and invest. Now, almost every bank provides you the option to invest in these deposits through online mode. Many banks do provide lot of innovative and flexible Recurring Deposits now (For example – ICICI Bank’s iWish Flexible RD). But, when it comes to Recurring Deposit Taxes and Fixed deposit taxes – how they work with respect to tax implications is still a big question mark (confusing point) for many of us.

In this post let us understand – Whether the interest earned on Fixed Deposits and Recurring deposits is tax free? Is recurring deposit interest is taxable or not? How are RD maturity and FD maturity amounts treated in terms of taxation? Should I pay taxes every year on RD/FD or should I pay the income tax on the maturity date of my RD/FD? How is TDS (Tax Deducted at Source) applicable on Recurring deposit (RD) and FD? Budget 2015 – Is TDS now applicable on Recurring Deposits (RDs)? How to calculate interest amount on RD and FD? Do they have any income tax benefits or exemptions?Recurring Deposit taxes savings

From your Income Tax Returns point of view, it is very important to understand the below points. I have seen many investors  ignoring (or may be not aware of) the Fixed deposit taxes and Recurring Deposit taxes in their Income Tax Returns (ITR). I am sure you might have heard or seen your friend(s) receiving ‘compliance notices’ from Income Tax department for not showing these Time Deposits (FDs & RDs) in ITRs.

Tax implications on Fixed Deposits

  • There are no income tax benefits or deductions applicable for Fixed Deposits. The interest income earned on Fixed deposits is taxable. (5 year Tax saving Bank Deposit have tax exemption under Section 80c, but the interest income earned is taxable on these deposits too.)
  • Banks do not deduct TDS if the Interest income earned on Fixed Deposits is less than Rs 10,000 Rs 40,000 per year (from AY 2020-21). That does not mean this is a tax-free income in your hands. You still need to add this as ‘income from other source’ when you file your Income Tax Returns. (If the interest exceeds Rs 40,000 in a financial year, the bank will deduct 10 per cent tax before crediting the interest to the account.)
  • Interest income on your Savings Bank Account up to Rs 10,000 is tax free as per Income Tax Act 1961. Do not get confused this with the above point. Interest on your Savings a/c balance is different from the FD interest.
  • Individuals who do not have taxable income and do not have any other source of income can submit Form 15 G (or) Form 15 H (above 60 years old person-senior citizens) to their banks to avoid TDS. NRIs cannot submit these forms. If your interest income itself is above the income tax exemption limit (for a given Financial Year)then you are not eligible to submit these forms. Remember that you need to submit Form 15 G or Form 15H every year. Banks may ask you to mention the details about your other Bank(s) FDs too.
  • If your interest income on a Fixed Deposit is more than Rs 40,000 then you need to show the entire interest income when you are filling your Tax returns. If banks have deducted TDS on this income, you can capture this information in the “TDS Sheet” of your Income Tax Returns form.( Banks deduct TDS on FDs at 10 per cent only if the interest exceeds Rs 40,000 in a financial year. But your actual income tax slab may be say 30%. So, you need to pay the income taxes according to your slab.)
  • An important aspect which one needs to keep in mind is that you have to furnish your PAN (Permanent Account Number) number to the bank. If you fail to furnish the PAN number, the bank shall deduct tax at the rate of 20% instead of 10% generally applicable.

Recurring Deposit Taxes – How do they work?

  • As per the provisions of Income Tax Act, there are certain investments/deposits on which no tax is required to be deducted without any limit of the amount of such interest.  Tax is not deducted on any interest paid on any savings account or deposit in any of your recurring deposit account, be it with any bank, or Co-operative credit society or Cooperative bank.
  • Banks Deduct TDS on your Fixed Deposits but not on Recurring Deposits. “No TDS on RD is charged,” this does not mean, it is a tax free income. It’s a misconception.
  • The interest income earned on your RD is not exempted from income tax. It is taxable.
  • You need to add the interest income as ‘income from other source’ when you file your IT returns.

Latest News : The budget 2015-2016 has put RDs at par with FDs for TDS purpose. Banks will deduct Tax Deducted at Source (TDS) on Recurring Deposits too, from 1st June, 2015. Remember, TDS doesn’t end your Tax Liability.  Interest on RDs & FDs is fully taxable as income at the rate applicable to you. So even if TDS has been cut, you might have to pay more tax.

Budget 2018- 19 & New Section 80TTB

For Senior Citizens, the Interest income earned on Fixed Deposits & Recurring Deposits (Banks / Post office schemes) will be exempt till Rs 50,000 (FY 2017-18 limit is up to Rs 10,000). This deduction can be claimed under new Section 80TTB. However, no deductions under existing 80TTA can be claimed if 80TTB tax benefit has been claimed (the limit for FY 2017-18 & FY 2018-19 u/s 80TTA is Rs 10,000).

Section 80TTA of Income Tax Act offers deductions on interest income earned from savings bank deposit of up to Rs 10,000. From FY 2018-19, this benefit will not be available for late Income Tax filers.

Budget 2018-19 has also proposed to raise the threshold for deduction of tax at source (TDS) on interest income of Bank / Post office / Co-operative Bank deposits for senior citizens from Rs 10,000 to Rs 50,000 (u/s 194A). This is applicable for FY 2018-19 / AY 2019-20. (Related Article : ‘List of Income Tax Exemptions for FY 2018-19‘)

How much Income Tax do I need to pay on FD’s & RD’s interest income?

TDS and income tax slab rate tax liability refund claim for extra tds paid

  • If your taxable income is below Rs 2.5 Lakh and banks deduct TDS (you can submit Form 15 G/H to avoid TDS), you can claim back TDS as refund in your Income Tax Returns (ITR)
  • If your income is between Rs 2.5 Lakh to Rs 5 Lakh, you need not pay any extra income tax. Because, the income tax rate of 10% matches with Bank’s TDS rate which is also at 10%.
  • If your income is in the range of Rs 5 Lakh to Rs 10 Lakh, you need to pay 10.30% beyond the TDS rate.
  • If your income is over Rs 10 Lakh, the differential tax rate is 20.60%.

When to pay income tax on my Recurring Deposit (RD) or Fixed Deposit (FD)?

Now that we are clear about Recurring deposits taxes and Fixed deposits taxes, we also need to understand when to show the interest income for paying the applicable income taxes?. Do we need to pay taxes on this income every year or when the deposit matures?

The answer is, the taxes on Bank FD (over and above the TDS amount) and full tax amount on RD can be paid either in every financial year (or) on maturity. We can choose when to pay the taxes on FD and RD on maturity, instead of each Financial Year. But, once opted (when to pay the taxes) we need to stick to the same method. (Actually in accounting terms these are known as ‘Mercantile’ or ‘Cash’ accounting methods).

Is Fixed Deposit/RD Interest Of Minors Taxable?

Sometimes, you may open FD or RD deposit account in the name of your minor kid. If you have opened a FD in your minor child’s name, you need to pay tax on the entire interest income. The income is clubbed with your income.

Another interesting point is, what happens if your child becomes a MAJOR before the FD/RD matures?

In this case, if you have been paying taxes on FD/RD every year, the RD/FD’s interest income is taxable in the your hands as long as your kid is a minor. As soon as he/she becomes a major, it is treated as his/her income. Your child is liable to pay the taxes.

If you chose to pay taxes on FD/RD maturity date, the tax liability vests on you (if your kid is still a minor), else your kid (who is a major) is liable to pay the applicable taxes (if any).

Though it is headache to pay the taxes every year, it is better to show the interest income every year in your ITR. Else, you may receive compliance notice about time deposits for FD/RD amounts (if these are not included in your ITR). (Do not get scared when you receive these kind of IT notices. You can reply to Income Tax department about the method you have chosen. But do reply to these notices.)

How to calculate the interest income on RDs ?

Banks issue/send ‘interest certificate’ or ‘TDS certificate’ on your FDs & RDs every year. So, regarding FDs you are very clear about TDS and there is no confusion regarding the FD interest calculation part also. (Most of the banks have made these certificates available online. You can visit your bank’s website and download them).

Since Banks do not deduct TDS on Recurring Deposits, they do not issue TDS certificates for RD investments. So, the calculation of the total interest income earned on your RD(s) in a given Financial year can be quite cumbersome. (Also, most of the bank offer RDs on a quarterly compounding basis).

I suggest you to visit the below links to calculate the RD interest income.

  • RD calculator (Corporation Bank website) (This RD interest calculator considers investment in BEGIN mode. Lets say you book RD on a monthly basis, then it is assumed that the investments are made in the beginning of every month.) (You need to deduct the total invested RD amount from total maturity amount, to get the interest amount for a specific period.)
  • Freefincal.com

When do you pay FD/Recurring deposit taxes? Do you show the FD/RD interest in your Income Tax Returns (ITR) every Financial year? Do share your views and comments. Cheers!

Continue reading :

(Image courtesy of hin255 at FreeDigitalPhotos.net) 

Sreekanth Reddy:

Sreekanth is the Man behind ReLakhs.com. He is an Independent Certified Financial Planner (CFP), engaged in blogging & property consultancy for the last 11 years through his firm ReLakhs Financial Services . He is not associated with any Financial product / service provider. The main aim of his blog is to "help investors take informed financial decisions." "Please note that the views given in this Blog/Comments Section/Forum are clarifications meant for reference and guidance of the readers to explore further on the topics/queries raised and take informed decisions. These should not be construed as investment advice or legal opinion."

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  • Hello Sir

    It would be very much helpful if you could give me an advice on my issue detailed below:
    I had an RD at SBI (earlier SBT) in the name of my daughter. The RD Scheme was presented in 2014 as “TWINKLE” with highlighted benefits that “No tax on Maturity and on completion of tenure Full Maturity Value will be Returned”. My daughter was 12 yrs old in 2014 and I joined the scheme with my daughter as first name and myself second name. The monthly deposit was Rs. 10,000/- for a period of 6 years. But in June 2020 the maturity amount received was lesser by an amount of Rs. 32,000/-. The bank says that tax has been deducted as per the new income tax provisions. My doubts (not yet clarified by the bank) are these;
    1. Is my tax liability is for the interest amount I received from June 2015 only?
    2. The maturity amount was deposited by the bank in June 2020 to my bank account (till that time my daughter had no bank account or PAN card). But the amount is not reflected so far in my 26AS. Does it mean that the tax has not been paid in my name?
    3. My daughter turned 18 only after maturity of the RD (in July 2020 ie; after just 1 month of maturity and she got a PAN Card only after that). Is there any chance of showing the interest amount as income in her name?
    4. As a solution for this, the bank (manager) asked to take a PAN card for my daughter and produce it so that they will try to get the amount refunded through revision of income tax statement filed by them. Is this possible?
    5. As stated earlier the RD scheme named as “TWINKLE” offered that no tax will be deducted. Was it not the responsibility of the bank to inform me (and naturally all such customers) that it has been made taxable and maturity amount will be less than what is claimed in the brochure? Also, I was not given with the option of deciding whether tax to be paid yearly or on maturity. Can I approach Banking Ombudsman seeking a solution for this, based on the above two arguments?

    • Dear Ashok ji,
      1 – Yes can be.
      2 – Kindly check with your banker about the non-reflection of TDS in your Form 26AS. Did they issue you Form 16A?
      3 – No, as it is matured before she attained 18 years, hence the income gets clubbed in your name. (But, note that banks generally show TDS in the name of Primary account holder. So, kindly check with them if TDS has been deducted in your name or not??)
      4 – Yes, they (Bank) can rectify the TDS entries. If TDS is shown in your daughter’s name, she can file ITR and claim refund.
      5 – Kindly note that interest income on FD/RD is taxable.

      Related article : 15 Q&As on Fixed Deposit Interest Income Taxation Rules (FY 2020-21)

      • Thank u so much for spending time for me. The comment is much helpful for me to get an insight into my own problem. Thank u..

  • I am a retired individual of 61 years old & my income is from INTEREST on FDs & NCDs.

    My question is on method of reporting of Interest on some Fixed Income Instruments which I have recently invested in.

     In the past had requested INTEREST Certificate from my bank for reporting CUMULATIVE 5 year tenure FDs interest income in my ITR.

    However, recently in Jan’19, in the current FY I have invested in the following instruments where interest will be paid/received periodically:

    1) Rs 3L in 3 Companies NCDs where I have opted for the ANNUAL INTEREST payment option. Interest will be received in NEXT FY. 

    2) Rs9L in LIC’s PMVVY scheme for Senior Citizens @8.30%, have opted for the ANNUAL INTEREST payment option. Interest will be received in NEXT FY

    3) Rs 15L in SCSS (Senior Citizen’s Scheme) where QUARTERLY INTEREST option is default & 1st Qtrly Interest will be usually credited on 1st April 2019, after the FY end.

    4) Rs 5L in Bank FD where QUARTERLY Interest option was chosen & 1st Qtrly Interest will be credited only in next FY.

    I had planned to report these incomes in next FY only after receiving actial credit. Please advise on how to report in case you do not agree. 

    (Both LIC as well as Companies whose NCDs I hold will not provide ACCRUED INTEREST Certificates for tax reporting purposes.)

    • Dear Yank,
      The interest income earned on FDs/RDs is not classified as Capital Gains.
      It has to be declared under the income head ‘Income from other sources’ when filing Income Tax Return.
      Such interest income is taxed at individual’s tax slab rate.

  • investments in post offices are in problem because kissan bikass patra term deposit etc are produced by a pssbook where post offices do not show yearly div and int then how a tax payer will show it to i tax return in every year

    • Dear swapan ..One can manually calculate the taxes on yearly basis and disclose them in ITR.
      Or can show the accumulated income on maturity date for the concerned Financial Year/Assessment Year.

  • Hi Shrikant.
    Thanks for the valuable info. My doubt is if the RD Ac was in name of my husband and he is getting matured amount in cash, can I deposit cash in my Ac and pay tax over interest income in my tie?

  • Hi Srikanth,
    I own two house,for which i am paying House loan.please suggest how better i can benifit for TDS.please give me clarity on this.
    please do needful

    Thanks
    Niranjan Reddy

  • Hi Sreekanth,
    Thank you so much for such a clear guidance. I just want to get a confirmation regarding one Recuring Deposit I had with Post office (5 year RD scheme) which matured in Dec’17. I did not get any yearly interest statement from Post Office and there was no mention about any TDS deduction upon maturity. I got a cheque from post office for the final amount.

    As per my understanding I should compute the interest as

    Interest = Maturity Amount – Total Amount Deposited

    I should then show this interest under the head “Income from Other Sources” and then accordingly pay tax on the same.

    Can you kindly suggest if this is correct or any other way of computation? Also is there anyway to minimize the income tax on this?

    Once again appreciate all the good guidance you have been providing through your blogs.

    Thanks and Regards,
    Ajinkya Joshi

  • hai sir last yeasr i opened R D A/C in Thaigaraja cooperative bank in bagalore 15months i need to pay 2500 some month i am paying later along with 50rs fine that is ok but they are taking 9rs for GST,So for this need to know i need to pay gst for this kindly reply me

  • Hi Sreekanth.

    My CTC is in between 8 to 9 Lakhs.
    I have home loan upto April and closed the same recently.
    I am having Insurance for 10K per annum and kids school fees.
    I need to come out from TDS please let us know the savings plan in postal to save my TDS

  • I want to invest on rd in post office for 5 years and want to pay tax on intrest that is earned annually. But post office official says they can only tell the maturity amount and can not give detail of intrest earned every year. How would i be able to calculate annual intrest earned. can i divide the total intrest earned in five years by five and pay tax every year.

  • Hi Sreekanth,

    I’m a foreign national on a long term student visa and do not have any income here.

    1. How much maximum interest I can earn per year from FDs or RDs without having to pay any taxes?

    2. How much maximum interest I can earn per year from regular savings account without having to pay any taxes?

    3. Would these 2 amounts be considered separately or would they be added?

    • Dear Marek,
      1 & 2 – Up to Rs 2.5 Lakh, but banks can deduct TDS and you can file income tax return and claim the REFUND of TDS (if any).
      Both would be added under the head ‘income from other sources’.
      Kindly note that interest income on Saving account up to Rs 10,000 is tax-free.
      If interest earned is more than 10,000 then balance amount will be taxable as before i.e considered as Income from Sources and taxed as per your slab rate.
      Read : Latest income tax rates FY 2017-18.

      • Thanks Sreekanth,

        Something is still not clear for me in your answer.

        You say: “1 & 2 – Up to Rs 2.5 Lakh”, which means that for Savings account (that’s point 2) the tax-free interest income would be 2.5 Lakh and at the same time you say : “interest income on Saving account up to Rs 10,000 is tax-free”

        Can you please clarify.

        • Dear Marek,
          The basic exemption limit is Rs 2.5 Lakh, so any income which is below this limit is tax-exempt.
          In case if the interest income on FDs/RDs/Saving account is above Rs 2.5 Lakh it’s taxable income.

          • Thanks again!

            I must say you have an excellent website covering so much useful information.

            I have another question which I’m not sure where to post, so I’ll ask it here if you don’t mind.

            Do the foreign nationals on a long term student visa and long term residence permit have to file the tax report to ITD over their assets (bank accounts, investments, properties etc.) that they own in their home countries?

              • Dear Sreekanth,

                Thanks very much for all your great answers. I am similar to Marek, above, same kind of visa and living in India long term–no work, only a small interest income. In 2009 I had one year when I had taxable income in India from an FD. But I then moved that money back to my home country and since then I have had only a few hundred rupees interest annually on my Savings account. This year I received a compliance message from the Tax Dept asking if I had any taxes to pay, and asking that I file a tax return.

                However, when I go to my online account of the Indian Tax website, there is no mention under issues pending for me to answer any question about why I have not paid any taxes. So I cannot reply to their query about not paying any taxes there.

                I am hoping not to have to file a Tax return as I have no future plans to have any taxable income in India for the rest of my life and would prefer not to have to start filing a tax return every year going forward.

                Thanks very much for your insight!

                James

  • Hi Sreekanth,

    I am looking for a short term investment plans to settle my Bank Loan (5L)

    I don’t have any investments and savings till today, but now I would like to open RD or FD to repay my Loan ASAP. So that I can start saving money for my future.

    Also, I started to earn more from last month. Now I am planning to settle down all my debts and to save my tax

    Please advise.

  • Hi

    I am planing to sell my flat owned by me and my husband.

    I request your guidance on the following :

    1. How to get the payment ? Would it be exactly 50% each ?
    2. If I wish to receive 100%, then any clause in the sale deed could be included where my husband’s consent could suitably worded ?
    3. I need some assistance on arriving at capital gain and the corresponding tax that we need to pay. Would you be able to give this support ? If so, please let me your contact details.

    Thanks
    Choodamani

  • DEAR SIR,

    WISH YOU A VERY HAPPY NEW YEAR. AGAIN I AM DISTURBING YOU.

    I MADE SOME FD IN THE NAME OF MY MOTHER (AGED ABOUT 70 YEARS) AND ACCORDING TO YOU THE MATURITY AMT. IS TAXABLE IN THE RESPECTIVE FY.

    AM I RIGHT? LOOKING FOR YOUR EARLY REPLY.

    • Dear KAUSHIKI,
      Happy new year to you too 🙂
      In fact, it is accrued interest. For ex : if you book 3 year FD, then every year interest gets accrued, which can be declared in ones Income tax return. Bank also issues TDS certificate based on which you can disclose the income.

  • Hi Sreekanth,

    Please clarify my doubt, I had done Tax saving FD (5 yrs lockin period) on Jan 10th 2017, So can i claim it under section 80C for year 2016-2017 is this get eligible ? or do i need to wait to claim this for next year (2017-2018)

    Thanks,
    Abhijith

  • Hi,

    I have a RD(for 57 month) 2000 per month since April-2012, now it will mature in Jan-2017 with amount 142000. Please let me know TDS is applicable or not as it was introduced from April-2015.
    As per my understanding, principle amount should be considered as amount till March-2015 and then Interest on this amount should be considered for TDS.

    Please confirm.

    Thanks
    Manoj

  • Hi ,

    I come under 20% Tax Slab limit. I had given 15 G signed to some banks & because of that they didn’t deduct TDS on my FDs even though interest earned is more than 10K. I can see the details now from 26AS.

    1. Is it OK to pay the Tax now & show it in ITR returns.
    2. Is there any way to cancel the 15G signed which I had handed over to bank..

    Thanks,

  • Sir,
    I have an FD of rs1,00,000 in a bank. For AY 2014-15 TDS rs1,202 was deducted but at that time i didn’t knew what was TDS. Can i claim its refund now.

    • Dear Abhishek,
      Did you check the intimation sent by the IT dept specifying the sum determined to be payable by, or the amount of refund due to, the assessee (u/s 143)? If so, you can file rectification return and claim the refund.

      • Sir,
        My income is below 2.5 lakhs and I don’t file returns. I came to know about tax deduction only 2 weeks back.

        • Dear Abhishek
          In one financial year you can file your IT Returns for previous 2 financial years. For example – in the FY 2016-17, up till 31st March 2017, you can file return for the previous 2 financial years 2015-16 and 2014-15. So, ITR of FY 2013-14 can’t be filed now.

  • Sreekanthji…i had a quiries..
    Suppose my income is 4 lakhs/annum than i eligible to pay tax on rest 1.5 lakhs. And suppose i start a RD for 5 years whose matured value is 7 lakhs 20 thousands. Now my question are as below.
    question no. 1: So i am liable to pay Rs.15000 as income tax.if i have 30 thousands insurance coverage by LIC than how much tax i have to pay?
    Question no 2: Bank will deduct 10% TDS on matuirity value or yearly basis if interest income exceeds 10000 per year?. Now the fact is for RD bank will give interest on matuirity -than how do i understand that what is the yearly interest generated?
    Question no 3: If bank will deduct 10% TDS on RD which is more than my calculated income tax than how do i get return my extra deducted money?
    Question no. 4: If Insurance coverage is more than deducted TDS & income tax -than what should i do? Also if i opened PPF a/c than how do i use its benifit on income tax.

    • Dear Suman,
      1 – Kindly use this tax liability calculator, click here..
      2 – TDS is deducted on Yearly basis, based on that you can find out the total interest amount credited on such deposit.
      3 – You can file your income tax return, provide the TDS details and claim the extra TDS amount (if any) as REFUND.
      4 – You can claim life insurance premium amount and PPF contributions as tax deductions u/s 80C. This will reduce your tax liability.

  • Dear Sir,

    Please inform me,
    I have a Postal RD account amounting 8000 (Eight thousand) per month .
    opening date -may-2014. Now the accumulated principal amount is growing year wise, so interest al so increase. So please conform now, I have to submit form 15G or Not required.

  • Hi Mr. Sreekanth,

    Can you please tell me whether income tax department will consider the amount of fixed deposits and liquid cash deposited in a bank account as one

    Example, if i have 3 lakhs as fixed deposited amount and 3 lakhs as liquid cash in my savings account then will it be considered as 6 lakhs in my account or they will count that in two separate amounts

  • Hi,

    I have an RD in my daughter’s (aged 8 years) name and TDS was deducted since I did not furnish the PAN while opening the RD acct. Now the TDS is not reflecting in my 26AS even though my PAN is submitted in the Bank. Bank people are asking me to give my daughter’s PAN but since she is a minor we cannot claim refund. How do I proceed to get my refund?

    Thanks,
    Kavitha

    • Dear kavitha,
      As you have submitted your PAN now, you may ask your banker to revise the e-TDS return and issue Form 16A.
      You can claim the refund in your name by clubbing the interest income to your taxable income.

  • sir i have opened a flexi account and my total amount was 21000 without interest but when i was closed it than i have got the total amount is 18700 only so can you tell me please that how is possible the deduct of actual amount . how can i refund my actual amount and TDS.
    thank you

  • Dear Sir,
    I have file return for the AY 16-17.
    In interest certificate INT Paid & INT Accural is shoing.
    Which one i have to take in income from other source.
    or should i take income from 26 AS?
    Please advice,

    Regards,
    Vishnu K.Verma

  • Hello Sreekaanth,

    I am currently 23, student, and have no proper income. Sometimes I do freelancing and earn money which are transferred to me as NEFT those are normally 4000-5000 per month. I use this money for my monthly expenses.
    Next instance is I have around 1lakh in two of my bank accounts. Now from this 1 lakh, I will be investing 5000 per month for RD, that is 60000 would be my principal amount, and 645000 as my maturity amount considering 7.5% interest.
    This is all the income which I have currently. Now I would to apply for a credit card (as that would help me buy things at EMIs and would be easy for me to pay) and Axis bank wants my ITR statement. If I file ITR with these income details as I said above, will any TAX amount be charged against me??

  • Dear Sir,

    My father was expired last year oct.2015. he was in a PSU. We recieved Rs.80 lacs on behalf of his PF,Gratuity and LIC which are deposited to my mother’s saving account(also avail RD facility on A/C) . My mother is a house wife.
    Now she is getting interest on that amount and she also submitted 15G and 15H forms with PAN card details.
    Does she need to fill ITR on interest received?, if yes then how much tax she needs to pay?

  • sir i want to invest 7 lac in fd in sbi, i am a student and this money i got as a gift, so i want to know whether i have to fill any form for the tax deducted on income from interest or bank will credit the interest after deducting the tax.or there will be any problem if i invest entire amount in one fd or its better to invest in multiple fd please reply asap and thank u

  • Hi Sreekanth,

    I am a PG student and have an FD of 5 lakhs. I earns around Rs 40,000 every year as interest and don’t have any other income sources. Still, TDS was deducted.

    So when I file ITR, how do I claim the amount back?

    Thanks,
    Gautham

    • Dear Gautham,
      You can show the interest income under the head ‘income from other sources’ of ITR and TDS details in ‘taxes paid & verification’ sheet. The refund amount will be reflected in ITR.
      The last date for filing ITR for AY 2016-17 was Aug 5th.

  • Hello Sir,

    A small doubt. I am salaried person. My wife is homemaker and no sources of income.
    Suppose i give 10,000 every month to my wife and she opens an RD account (10k montly, for 60 months), will there be TDS and does she need to file ITR

  • I am house wife.if i do fixed deposit 5 lakhs for 1 year , do i need to pay taxes even i am not a tax payer, it can be trouble for me ?? kindly let me know.

  • Sir
    I am having 2 FDs and 2 RDs of tenure 5 years. The accrued interest on these saving is 35ooo for the year 2015-16. I am a salaried person and my yearly salary is 300000/- . Please guide whether i have to pay tax every year or should i pay at maturity. How can i justified the same to income tax department if i get the notice.

    • Dear Varun,
      So, ideally it is better to include the accrued income under the head ‘income from other sources’ of your income tax return and pay applicable taxes (if any).

  • Dear Sir
    I am a student and I have Done 3 FD’s(10+13+70) this Year And have a balance of 2500₹ in my saving a/c. I want to know that How Much tax will be deduct from my a/c and why and why not Pls Tell me Sir!

  • I have income only from bank FDs and have already submitted form 15G in each bank at the beginning of the year. Because of this, there was no TDS. I am declaring accrued interest during the financial year as “Income from Other Sources” in ITR1. As there was no TDS, is it required for me to fill details in schedule TDS2? Schedule TDS2 shows some details (with Nil TDS) prefilled while others need to be added manually, if I need to provide all the details. Please Advise.

  • Sreekanth,

    For me TDS deducted on my RD and I got form16A, But I dont know how and where to declare that in ITR (Income Details tab – Income from other sources (Ensure to fill sch TDS2) and please suggest is there any way to refund that RD’s TDS
    ** Note: that sch TDSs deducted mentioned in Tax Details

    Please suggest

    • Dear Abi ..Yes, you can mention it in TDS-2 section and also include such interest income in ‘other sources of income’ as part of your taxable income.

      • If I add that RD’s interest income in Other sources of income (16701 rs/-) – It shows in Tax Payable value (1770)

        But Its already deducted from my Bank account where RD is there.

        Please suggest

        • Dear Abi ..You need to add the income under ‘income from other sources’ and at the same time disclose the TDS details in ‘taxes paid & verification’ section of your ITR.

          • Thanks Sreekanth. I have added that income under income from other sources
            How to disclose the TDS details in ‘Taxes paid & verifi’ section…It shows tax payable (Tax for RD interest) in that section

            Please suggest

            • Actually my doubt is if that TDS is deducted from bank also we need to pay the amount while filing ITR

              • Dear Abi,
                Kindly understand that you are just disclosing the already deducted TDS details (deducted by your banker) by providing such information in ‘taxes paid & verification’ section.

  • I need clarification on the following. Say, i have a deposit of 300000 in a bank that earns me 7.5 percent interest. This would amount to 22500 as interest. What would be the tax on this amount that the bank deducts.
    I am in the 20 percent tax range with an annual income of say 800000.
    Is this 10 percent of 12500 ( 22500- 10000) ..which will be ruppees 1250.

    • Dear Mr Murthy,
      TDS is deducted by banks on the total interest income ie 10% of Rs 22,500.
      But interest income on FDs is taxable as per your income tax slab rate.
      So you have to pay balance tax dues when filing your income tax return, if you are in 20% tax slab rate.
      Read: TDS & Misconceptions.

  • HI Sreekanth…do i have the choice of paying tax on FD in the year it gets matured. Will it be a IT rule violation if the Tax is paid when the FD is maturing…if no…than can we take the advantage of TDS deducted by bank in the year while filing the return when FD matures… Regards Ashish

    • Dear Ashish,
      It is not a violation. But it is better to pay the taxes on the interest income as and when it is accrued.
      This is due to the fact that Banks deduct TDS amount (if any) and it gets reflected in Form 26AS.

  • Hi Sreekanth, I have an RD for which i have received form interest certificate this year. i will be showing it under income from other sources. How should i handle the interest earned for the previous years? i have not shown them in the earlier returns. Thanks

  • I want to file ITR – I (Sahaj) of last 3 years. My total income is below taxable income tax slab i.e below Rs.250000. So my query is that whether late filing return penalty is applicable. If yes than how much?

    Thank you in advance.

  • Sir,

    Will you please clarify whether the monthly installments into my RD a/c itself will be considered as my income and whether i have to pay tax for them in addition to the interest earned on them? . similarly i have opened an FD in the fin year 2015-16. Whether i have to consider this FD amount as a whole as my income or i have to pay tax only on the interest earned on it?

  • Hi Sreekanth,

    Congratulations on the good job you are doing.
    I have a query on TDS on bank fd interest income.
    My form 26as is reflecting interest income earned on fd from two different banks which is roughly just above 10000 each.
    Out of these two for one FD TDS @ 10% was deducted and for other its not.
    So when filing the ITR1, in income from other sources field do we need to show the consolidate interest income earned from both the banks or only that income for which the TDS was deducted?
    If latter is true, then do i need to delete the the other bank details(which did not deduct TDS) from Sch TDS2?
    Since i fall in 20% bracket i will end up paying more tax, so paying self assessment tax and the same should be entered in Sch IT section Tax details tab so that the tax payable will be NIL, is my understanding correct?
    Please advice.

    Thanks.

    • Dear Rakesh,
      Yes, you need to show the entire interest income from all the FDs under the head ‘income from other sources’.
      You can provide the TDS details which have been deducted under TDS-2 section.
      Kindly note that the interest income in FDs is taxable as per your tax slab rate. So, you got to pay the balance tax dues (if any).
      Read: TDS & misconceptions.

  • sir i have only income from fix deposit but bank deducted TDS on FD. how can i refund my TDS. when i fill ITR-1 sahaj it need employer TAN no. but i am not employee of any office. what to do ?

    • Dear arpit,
      You need to provide the TDS details under ‘Schedule TDS2 Details of Tax Deducted at Source on Income Other than Salary [As per Form 16 A issued by Deductor(s) like Banks].

  • I am a NRE working in Gulf. I have NRE account. Recently I have opened a RD account in my son name, who is also staying in the Gulf only – school going. Bank has opened this RD as General Public. Funds to this RD account is from my NRE account on monthly basis. Is this RD on my son name is taxable in India ?

    • Dear Sankar,
      If the investments towards your deposit installments come from the NRE Accounts then the interest from an NRE RD is free from tax in India. Also, it is freely repatriable.

  • Hi Sreekanth

    Can you please let me know the procedure to pay self assessment tax online. The tax due is due to Multi deposit interest.

    I see a lot of challan forms online (ITNS 280, ITNS 282, ITNS 283 ). Not sure which one I should use to pay my tax due.

    I saw that I should use ITNS 280 and select self assessment.

    But last year I used challan ITNS 282 and selected same self assessment under section Interest tax.

    Can you please explain what these are.

    Regards
    JJ

    Thanks
    Janani

  • Hi Sreekanth,

    I have 2 RD accounts in my daughters name. However PAN number given in both accounts is mine.
    Now because of this TDS is appearing on my 26AS form. As such TDS deducted is 10% but because of my salary slab I now have to pay additional 20%.

    Need suggestions
    1) Will it be good if I link my daughters RD account to thei PAN numbers? (I need to get PAN cards for them)
    2) Or should I close RD accounts and open PPF accounts for them

    Please suggest

    Regards
    anurag

  • Hi Sreekanth,

    I have RD account which was started in Dec-2014 . This RD is for 2 years. So when I will receive money in Dec-2016.

    Bank have already deducted TDS 10 % in Mar-16 for complete 2 year.

    What interest amount I need to show in ITR , complete interest amount from “Dec-14 to Dec-16” or interest amount applicable for this financial year “Apr-15 to Mar-16” only.

    Please confirm.

    Regards,
    Nikhil

      • Previously I was not aware , I have to pay Tax on RD as well, so I did not show any income last year. So I think now its better to adopt 2nd method and pay complete tax on Maturity Dec-16.

        As Maturity date comes in next financial year, so what I need to do in the case Income Tax sends any notice to me this year.

        Thanks for your help.

        • Dear Nikhil,
          Maturity date is in this FY 2016-17 (Dec-16). Taxes can be filed for AY 2017-18.
          In case if you get tax notice for previous AYs, you can pay the dues.

  • HI,
    you have mentioned that the TDS is deducted for RD/FD only if the interest is above Rs.10000 but i have read many articles where it has been mentioned that the TDS is deducted on entire interest. Even i have observed in my case where bank had deducted TDS on total interest Rs.11000 i.e RS.1100 deducted as TDS.

  • Hi,

    I am freelancer and earned about 2 lakh per annum without deducting expenses. I never filed ITR as nil tax libility. I did FDs and earned 120000 interest. Bank deducted 10% TDS. However FDs are not matured or reinvested. what should I do for getting refund of TDS deducted? Which ITR I should use for efiling, if I have to file ITR?

    Thanks in Advance
    Jyoti

  • I have Bank FD (1year) of 5lakhs that matures on 21st july2016. I have given PAN, Form 15G to bank. No TDS at bank. Can I show interest on FD as income in financial year 2017-18 for IT return filing.

  • Dear sir,

    I am having an RD & FD in a PSU which matures during the coming month of September this year. But TDS has been deducted from the bank last FY 2015-16 since the interest combining of RD & FD exceeds INR 10000. Since the RD & FD matures current FY 2016-17 only, Shall I have the option to carry forward the TDS of RD & FD to current FY and mention it to next year ITR? i.e shall I less this TDS amount to my income tax liable to pay next year ?. Expecting your reply. Thanks in advance.

  • Dear Sreekanth Reddy,

    There is one FD with Thane Bharat Sahkari Bank where as per Interest Certificate there is interest of Rs.26392 accrued duirng F.Y. 2015 – 16. Bank not deducted TDS since Form 15H were submitted. There are also other 3 bank namely Axis Bank, Andhra Bank and Punjab National Bank where also 15H submitted. But while I was going through Form 26AS, interest accrued from Axis Bank, Andhra Bank and Punjab National Bank are getting reflected in Form 26AS but interest from Thane Bharat Sahkari Bank not reflecting. so i am confused whether to show this interest or not in my ITR? Before this i never filed return since income was below basic exemption limit.

    And this time as per my calculation some around Rs.5000 coming payable.

    So can i pay it through cheque at bank OR i need to pay it online only?

    Thanks in advance.

      • Dear Sreekanth Reddy,

        Whether in ITR we need to disclose that Saving Account also where we are second holder? Because here in my case 1st account holder discloses the saving account in his ITR but my query is that whether 2nd Account holder also need to disclose that account in his return?

  • I have a FD which earns less than Rs 8500 interest. In the same branch I also have RD which earns more than Rs 2500 interest. Will these Two interest be treated separately for TDS i.e, since int on FD and RD is less than 10000 there will be no TDS deduction or they will be combined and TDS will be deducted on total interest earned on FD+RD.

    • Dear Aryan,
      Let’s keep this simple. Even if no TDS is deducted, kindly note that interest income of RD/FD is TAXABLE (if any) as per your income tax slab rate. I believe that if interest payout (FD+RD) is more than Rs 10,000 Bank will deduct TDS.

  • Hi Sir,

    I am Shivakumar, I am new to this RD/FD and i have read many articles on this and still i struck with full of confusion.

    I am thinking to open one RD in ICICC bank for 5 years with monthly installment of 5000 rupees.

    My question is, is there any TDS for the interest what i will earn and can i get any tax exemption for this.

    • Dear Shivakumar ..Interest on RD is taxable & TDS is also applicable. No tax benefit is available. But you can book a 5 year tax-saving FD (fixed deposit) and this can be claimed as tax deduction under section 80c.

  • Dear Sir,

    I have an FD of Rs. 2lacs in 2009 in a bank account.FD nature is yearly matured but in 2016 i get to know that Bank has deducted the amount of Rs. 70,000 approx due to non having of Pan Card & not filling the form 15G/15H. But when i visit the Bank they show us the TDS amount is 4000 aprrox for 2014-15 and 4000 approx for 2015-16.
    Therefore, In this case i have confusion that how tha amount of 70,000 deducted by Bank.How thaey calculate this amount.
    Kindly tell me that how they calculated and Can we claim refund from Income tax after filling the Income Tax Return of last two years.

    Thanks & Regards

    Riyanshi Chaudhary

    • Dear Riyanshi,
      You may first apply for PAN (if you do not have one) and you can surely claim refund of TDS amount (based on your other income) when filing your ITR.
      Banks deduct TDS @ 20% if one does not furnish PAN number.

      • I have been taken Pan Card.Then what need to say bank. And what will be the further step for the same query.
        Kindly recommend the Procedure.

        Thanks
        Riyanshi Chaudhary

  • Hi Sreekanth,

    I have RD account which was started in Feb-2012 with Indian post office. This RD is for 5 years. So when I will receive money in Feb-2017, do I need to pay tax on interest earned?
    When I opened this RD account, we didn’t have this clause, still do I need to pay tax?

    Regards,
    Mangesh

  • Hi Sir,

    I have opened a Term Deposit under tax Saving Scheme on 15-Mar-2016.
    I was about to file returns for Assessment Year 2016-17.
    Should I add Term Deposit for Assessment Year 2016-17 or can I show it for Assessment Year 2017-18?

    Thanks
    Nandha

  • My son gives me Rs.20000/- every month from his taxed income which I keep in bank deposits. In whose hands the interest on such deposit RD/FD is to be taxed? My son, me or my husband? My husband has his own taxable income.

  • sir
    i am a salaried employee.i do not have to pay tax as per salary.An amount of Rs 6000 has been deducted from my fd
    which was withdrawn in september 2015.The aggregate of deductible amount under chapter vi a comes to Rs 67577 only.If I make a taxgain deposit of RS.60000 in march 2016’can I claim refund

  • Sir,
    I had created 2 FDs in HDFC Bank and 1 RD, whose total ineterest is appx 5k per annum, in my Wife’s Name, She has Seperate PAN and KYC , but i did file her ITR.
    So please Suggest me 1) should I file ITR of her ?
    2) TDS and TAX applicable on her ?

  • I am investing a sum of 22000 in an RD for 10 years from this year onwards. I need to know the following:
    1) At what stage will the bank deduct the TDS i.e every year or at maturity.
    2) Do i need to show the interest earned for every year under Income from other source in the ITR or can i show it at maturity directly.
    3) If i break the RD in the mid way before the maturity how will the total ammount be tax impacted. Do i need to show that amount received under “Income from other source” on that particular year.

    Regards
    Adam

    • Dear Adam,
      1 & 2 – Every year. It is better you show the income every year under ‘income from other sources’ in your ITR.
      3 – Whatever interest income which you have accrued, taxes (if any) have to be paid.

  • hiii ,

    my doubt is when i get a fixed deposit of 50,000 /- mean its possible to show a 50,000/-as a income tax each year or once in a five year ?

  • Hi Sree,

    I would like to invest 10000 to 12000 of my salary every month for a period of 3 to 4 years in some saving plan where i will be getting tax benefits with 0% risk. Please advise

    Regards
    Hamsa

  • Dear Srikanth
    Our IT rules seem unfair.
    If we have account in minor name then we have to pay tax on interest of that account.
    But what if I (first holder)am have a joint saving account with my mother ( second holder) and my mother is a senior citizen. then can I include the interest income from this account in my mothers ITR ?
    I think this should also be allowed.
    Please advise.
    Thanks in advance.

    • Hi,
      Ideally you can submit a mandate to your banker about the source of deposits for the said bank account. If you declare that your mother is the main contributor for the deposits, she can show the interest income earned on this account in her ITR. Else, banks generally deduct TDS or issue tax certificates in the name of the first holder.

  • Buddy,

    I have opened an ICICI i-wish RD account with monthly deposit of 2000 which is 24000 per year plus interest @7.9%.

    Can I show it in TAX declaration for Tax exemption ?

    If Yes, How much I should show ?

    If No, How I can use RD for Tax exemption ?

  • i deposit 2000 p m in rd in post office.for the year 15-16 i deposited 24000 this way.how much will be the interest on this scheme.do i have to quote this in my itr

  • If I am using a cash flows method of calculating interest income, will extension of FDs be considered income or not?
    e.g. I have an FD for 1Lac for 1 year @10% deposited on Feb 2014. In Feb 2015, it matured and I got 1.1Lac, but I didnt get it to my account and asked the bank to extend it by another 1 year. In Feb 2016, I got 1.21Lac and then I got it encashed. Does it mean I have income of 10k in FY 2015-15 and 11k in FY 2015-16 OR does it mean I have an income of 21k in FY 2015-16 and zero in FY 2014-15??

    Important thing to note here is that the FD actually matured in Feb 2015 and I could have got a similar cash flow return if I would have encashed the money and done another FD for the amount encashed. Will this manual step change the taxable interest for that FY?

  • I have a FD for 10 Lacs which is under joint name of myself and my wife (i am the first name). However, the amount was deposited to the FD from my wife’s bank account.

    I am confused on the following:
    1. Will the banks return the maturity amount in my or my wife’s account post maturity?
    2. In case they return it to my wife’s account, whose income will it be counted as? My or my wife’s (I am the primary holder of the FD but my wife is the recipient of the maturity amount)?

    • Dear Arpit,
      1 – It depends on the ‘maturity or renewal’ instructions given by you to the bank when booking the FD.
      2 – You can give mandate to the bank about the ratio of ownership of the deposit, accordingly they can issue TDS certificates.

  • Dear Mr.Sreekanth

    Request your views on the following points :

    Arrears received in FY 15-16 relating to previous FYs 2012-13, 2013-14 and 2014-15.

    If salary arrears are apportioned to the respective previous years for IT computation under section 89 of the IT Act, how to consider PF arrears for claiming exemption. i.e. PF arrears also to be apportioned to the respective previous years or total PF arrears could be exempted in FY 15-16.

    Thanks
    Narasimhan

  • Sir, i’ve deposited amount in R/D and this R/D is for 5 years in bank as well as in Post office. Whether my amount deposited in R/D is exempt u/s 80c

  • Hi Sreekanth,

    Thanks for such an informative article.
    I had a doubt though. In your article you had mentioned “If your income is over Rs 10 Lakh, the differential tax rate is 20.60%.”. This differential tax will be calculated on the Principle amount as well or only the accumulated interest? The reason I am asking this is, since a person’s salary is already taxed before being credited to salary account and after the tax deduction a person opens an RD.

  • Dear Mr.Sreekanth Reddy

    I have a query on tax applicability on interest income from Recurring Deposits effective 1st June 2015.
    We want to know interest to be reckoned whether from 1st June 2015 prospectively or 1st April 2015 retrospectively to be included for tax computation for FY 2015-16.

    In short – Would interest earned on RDs (matured / running) before 1st June 2015 also attract tax ?

    Shall be thankful for your clarification.

    Regards
    Narasimhan

  • Hi

    For RDs, Is interest rate compounded. And if yes, then is it monthly / quarterly / Annually. I’m more specific to SBI RDs

  • I hope you have answer for this . Iworked in India for a few years as a US citizen with OCI. I have 2 tax saver FDs which mature in 2018. My status has changed to NRI and I am requesting bank to change status from resident to NRO and re designate my savings account and FD. At the time of opening these FDs , verbally, I was told that they could be re designated as tax saver FD s cannot be closed prematurely. I do not have anything in written.
    For last 15 days, I have been referred from one person to another and in last communication, virtual relationship manager referred me to NRI service center, which is basically a call center. Call center is telling me to mark re book instead of re designate. Under terms and condition in the conversion form, it says fixed deposit will be liquidated and re-booked. Doesn’t this violate terms of Tax saver FD.
    Its much harder to communicate now as I am outside India . I am sure my situation is not rare. Resident to NRO and vice versa is a common phenomenon now. I have searched RBI circulars and there it says “all accounts and fixed deposits will be re designated on status change from resident to NRO.” I have not yet come across any mention of tax Saver FD.
    Do have any suggestion.

    • Dear Deepa,
      Yes, it violates T&C of tax saver FDs. One can not redeem or close the Tax saving FDs before the maturity date.
      I believe you can escalate this issue to higher authorities of your bank. If ok, share the name of your bank.

  • Sir,
    My brother is working in one of the leading MNCs and invests Rs. 50000 every month in RD which was opened through my mother’s name.So my question is whether my mother is liable to pay the taxes as she has no income besides receiving interest income on RD. Can she be liable to file the return under income tax? Or will the income receives by my mother be clubbed in the hands of my brother?

  • Sir,

    I have a bank fixed deposit in the year 2014-15 for five years which is eligible for income tax exemption in the AY 2015-16 But it was not claimed in that year. Now my question is shall I claim this fixed deposit in this AY2016-17. Please reply as early as possible

  • Dear Sreekanth,

    Can you please clarify me that interest earned on minor’s FD will be clubbed to father’s or mother’s income for tax purpose ?, and does it depends on the guardian of the minor ?

    Thanks in advance.

  • I have a doubt. I have a couple of FDs that will be maturing in the next year. I don’t get the interest money in my savings a/c. Do I have to pay the taxes in this year or once when they are matiured. I fall in 20 % slab.

  • Hi,

    I have a question regarding accrued and paid interest for a FY and how to show the same at the time of filling return. Last year my bank provided with a interest certificate that showed a combined interest amount (paid+accrued) and i declared the entire amount in my ITR form and paid tax on it.
    This year the bank has provided me with interest certificate that shows accrued and paid interest separately.

    My question is that doesnt part of accrued interest from the previous FY become paid interest in the current FY. The bank tells me to declare both accrued + paid interest and pay tax on it for this FY. but since i have already paid tax for accrued interest last year, wont i be tax paying again if i show entire amount this year?

    Please advice.

    Note that I have a sweep account where automatic FDs are made and interest is accumalated, however if a FD is partly broken, tax on that amount is paid to me right away.

    Thanks,
    Maryushka

    • Dear maryushka,
      If you have already accounted for a portion of the interest that is earned in previous years then there is no need to included it again in this year’s ITR.

      • Thanks Sreekanth!
        So that means that accrued interest does become paid in the next financial year right?

        Let me give you an example: For a particular FD, this was the details provided by bank
        – FY 2013-14 -> interest accrued + interest paid = rs 2989/- (on which amount i paid tax)
        – FY 2014-15 -> interest accrued =812/- and interest paid = rs 2543/-

        From this FY onwards i would like to pay tax only on paid interest
        since I have already shown accrued interest in last FY, should i be paying tax on Paid interest in this year.

        I am confused, because these FDs are made from sweep account, and the accrued interest will be calculated based balance at a particular amount which changes throughout the year, so ideally the accrued interest will go on changing. Please advice

        • Dear maryushka,
          The best thing to do in this case is, to crosscheck the TDS details given in your Form 26AS. You can show the amount under ‘Total amount paid/credited’ column in your ITR. Also, show the TDS which is already deducted by your banker in the ITR.

          • Hi Sreekanth,

            A CA friend had also advised the same but no amount appears in my form 26A as I have submitted form 15G to the bank and hence the bank is not deducting TDS

              • Hi Sreekanth,
                No, Actually its above the limit and I was not aware that I should’nt be giving the 15 G form last year. I used to submit the same as too many transactions used to happen because of my Sweep Account. This year onwards I will not submit the same.

  • Dear Shreekanth,
    Your explanation on RD & FD interest liability and taxes to be paid is excellent. I am enriched with the information. I think, the clause of RD interest taxable applies to the FY2015-16 and not from the financial year 2014-15 (AY2015-16). The point is that I have received Rs. 8500/- as interest on RDs and SB account received in FY 2014-15. Am I liable to show in the income (received from other sources) since I am a tax payer and pay the tax in in the AY2015-16? Please advice.

  • Hi Sreekanth,

    I want to open an RD account for period of 2 years. at the same time I do also expect that interest earned in a finance year should not exceed Rs. 10,000.

    Would you please suggest me maximum amount for which interest won’t exceed the mention limit?

    I checked RD calculators online for monthly installment Rs. 5000 for 2 years with interest rate 8.5. I found the maturity amount is Rs.131143 with interest gained Rs. 11143. My understanding is as this interest is for 2 years, bank won’t deduct tax on interest as it don’t exceed the required limit.

    Could you please let me know whether my understanding is correct or not? Should I go with this option?

    Thank you.
    Avadhoot Nayakal

    • Dear Avadhoot,
      It depends on the rate of interest right? You may check with your banker.
      You may have to show the interest earned on RDs in your Tax returns (though just accrued but not paid in a given financial year). Kindly note that TDS not applicable does not mean that it is tax exempted.

  • Dear Sreekanth,

    I am NRI.
    Also am NOT India citizen.

    Question 1: Which ITR form am I supposed to use? I have only income from the FD.

    Question 2: Regarding disclosing number of bank account, do I mention only “saving” and/or “current” accounts? Are FD accounts considered neither?

    Question 3: Why is India government so stupid and not explain all these stupid things?

    Sorry, last question you no having to answer.
    Madhu

  • Dear Sree,

    You articel is very informative & clear. I have RD closed in the month of Feb 2015 & received interest and also I received from my bank to submit Form 15G, I have submitted too. But I am in the tax slab of 20% based on my salary. My question are 1) Do I need to pay tax as RD interest is less than Rs.10,000? 2) How do I declare the RD interest in the ITR form?
    I have FD made for short duration & interest Rs.850 accrued in the month Apr 2015, for this I need to declare in ITR for this year? Please reply.

    • Dear Haribaskaran,
      Whether TDS is deducted or not, interest earned on FD/RD is taxable. Yes, you have to include the interest income under the head ‘Income from other sources’ in ITR form. The April’s interest income has to be included in ITR form of AY 2016-17, not now.

  • Dear Sreekhant,

    Please kindly read my situation and offer your thoughts/advice:

    I have 25,00,000 rupees I deposited in FD NRO account in July 2014 in State Bank of India. This FD is due to mature later in 2015. It is cumulative and the order is to repay principal and interest upon maturity. Also, I am US Citizen. I do not live in India so am NRI.

    When I checked my 26as statement, only 300 rupees had been deducted at source on 12/31/14 and credited to Income Tax Dept. When calling SBI, I asked why they haven’t deducted 30.9% and why interest is not showing as accumulated in my FD. The response was that all that will be done at maturity. My question is, however, what will the Income Tax Dept think of this. I have read elsewhere that I am responsible for tax “accrued” on this FD, even if interest has not yet paid, and if that is the case, then my calculation shows approximately 125,000 INR was my tax liability for 2014. This is less than the exemption limit, so ultimately I owe no tax and can claim refund. But with no TDS put in the IT Dept by SBI bank in the first place, will I be seen as someone who was delinquent? I am probably going to choose to follow a cash method of accounting to deal with this, as it seems that I will see interest and taxes as when they are actually received/paid on my statements, but then I do not understand my tax liability to IT if I choose that route. Finally, all of this puts a monkey wrench in the foreign tax credit issue, as I can only request credit for the year taxes apply.

    As someone who lives in USA, this has become a headache for me, and I hope you can clear up my confusion. Please tell me what you think I should do here.

    • Dear Amit,
      Tricky situation.
      Just try this suggestion..tell them you would like to close the FD a/c and shift to some-other bank 🙂 .
      You can show the accumulated interest on your FD during the financial year in which the FD mature.

      • Lol Sreekanth, I thought you would tell me more how to solve this 🙂

        I want to stay with SBI. I am not understanding your suggestion to find some other bank. Is SBI doing it incorrectly? But then you also advise that I can report accumulated interest in year it mature, so it seems you are saying that they are doing it correct. Are they right or wrong with their procedure?

        Now I am more confused.

        • Dear Amit,
          My point was not to confuse you 🙂
          I just said that if you inform them that you are going to move the funds, they may issue TDS certificate.
          As far as I am aware, banks have to deduct TDS (if any) on a quarterly basis and deposit the amount to IT department. They issue TDS certificate after the end of Financial year.
          From individual point of view, we can either pay income tax (if any) on the interest income on annual basis or on maturity. But, suggest you to include the interest income annually and pay taxes (if any) .

          • Lol Sreekanth, that was funny! The old “take my business elsewhere” threat always works! Anyway, I did finally get Form 16A, and it matches Form26as. But if I file India Tax Return reporting “accrued” interest and/or taxes, won’t doing so automatically create a Tax Notice?

            Sreekanth, you confused me again, I’m sorry. In your first response, you told me:

            “You can show the accumulated interest on your FD during the financial year in which the FD mature.”

            But in the second response, you say:
            “…But, suggest you to include the interest income annually and pay taxes (if any)”

            Please talk more in detail about the difference between the two, perhaps giving examples with hypothetical numbers. I’m quite sure that there are hundreds of thousands of NRIs out there with the same burning questions…and we would all be quite grateful if you wrote an article directed to helping this specific group of investors.

            Thank you again for your guidance 🙂

            • Dear Amit,
              There are two methods of accounting i)mercantile & ii) cash basis (I have quoted this in the article too).
              As fare as I am aware, the Tax law says that the investor can choose either of the two for declaring interest income.
              Though they provide the option, my suggestion is to follow mercantile system that is showing the interest income (accrued though not paid) every year and pay taxes accordingly. This will avoid getting tax notices too.
              So, what made SBI to issued TDS certificate now (Form 16a)?

              • I think it is because I contacted State Bank of India “NRI services” here in US and they sent my branch in India an email requesting the same. The 16a was forwarded to my email within a few days. I do not think anything nefarious is going on, as it is the same details as what I can see in Form 26as. But it is strange the hassle with this. Anyway, in order to stay in the lower income slab, I will probably report accrued interest when I file my India return, apparently before August 31 now since deadline has been extended by New Delhi. Reporting accrued is required in US on CDs, and since FD is essentially a CD too, I think it is wise to follow same accounting in both countries. I hope I don’t get a tax notice for not matching Form 26as when I report that accrued interest, but I also read in the FAQ of IT Department that there will be no adverse consequences faced by deductees when payer fails to deduct TDS. They will not be held in default, and there seems to be a lot of leeway offered to banks for not paying quarterly or yearly. IT says they can pay in the following year even!

  • hi sir
    i made a fixed deposit in May 2013 for 1year , for that i got intrest of 9308 Rs(on may 2014). I renewed it for 1 more year (i.e; may 2014 to may 2015) for which i have to get 19483 Rs , as its more than 10000 Rs i have to file 15G but i forgot to file it before march 2015 & submitted 15G in may 2015 ( before FD’s Maturity) . But they deducted 1775 Rs & 238Rs as tax on intrest in month of 31st March 2015. When i enquired for that in bank , they said that tax has been deducted in march itself so we can’t refund it to you, & they said you can get back that deducted amount by filing ITR. But i don’t know how to file ITR & Which ITR Form i have to file( i am individual having income form salary & FD intrest only). I am not tax payer as i am having Income from salary less than 2.5lakh. please help me on this.

    • Dear Sameer,
      You can use ITR 1 form (SAHAJ form) and get back the TDS amount as REFUND. The Income Tax Department has lot of resources on how to file taxes.
      You need to have your Form-16 & Bank’s TDS certificates to file the ITR. As of now the new ITR forms are not yet available, these may be available by 3rd week of June and it is better if you file your taxes before July 3st.
      IT dept website : incometaxindiaefiling.gov.in/

      • thank you sir, 1)But how to get Form 16 , i came to know that it will be issued by employer to there employee, which includes Tax deduction details for particular year. if its right, then my employer is not deducting any taxes except professional tax & PF only , my annual income is 2.4lakh. so please guide me if i am wrong.
        2) i gone through website incometaxindia.gov.in i got ITR1 form in excel format. is that one is old form,

  • Dear Sreekanth,

    I have a Query.Suppose if i Invest Rs.10,000 every month in RD for Next 10 years.What all the Taxes i should pay for this.
    Also during the Maturity of the Amount,whether any Tax need to be paid.
    Kindly guide me.

    • Dear Balachandran,
      Every year you need to pay income tax (as per your tax slab rate) on RD’s interest amount (Int earned during a specific financial year). If you pay income taxes on annual basis then no taxes are applicable on maturity amount.

  • Dear Sreekanth,

    I am a retired SC. I have a FD which earns less than Rs 10000 interest. In the same branch I also have RD which earns more than Rs 10000 interest.

    Will these Two interest be treated separately for TDS i.e, since int on FD is less than 10000 there will be no TDS on FD and TDS will be deducted only on RD interest which is more than 10000, or they will be combined and TDS will be deducted on total interest earned on FD+RD.

    Thus while submitting 15H, do I need to submit it for only RD or for both RD and FD?

    Kindly clarify.

    • Dear Mahesh,
      I believe that bank may combine all the interest payments based on your PAN and accordingly TDS is deducted.
      Suggest you to submit Form 15 H for both the accounts?
      Are you a tax assessee?

  • Sir,
    My name is Rachel Prakash. I am a teacher, and a first time investor.

    First of all thanks a lot for simplifying all aspects related to tax and investment. I have read through several websites to gain understanding on these tricky issues, and yours is the only websites which talks in common man’s terms.

  • Sir,I am a retired senior citizen.I would like to invest Rs.45,000/-as FD for 3 years in NBFC.According to you,
    where should I invest it to get attractive interest rate as well as safety purpose with having high cricil rate?
    please,advise me.

  • This move by the government is utter foolishness. Having no guts to collect income tax from tax evaders, government is trying to collect TDS from investors, who have already paid tax on their income and then saving. In case of RD, at each stage of deduction of tax at source, maturity amount of that RD gets adversely effected and the maturity amount becomes substantially reduced and the rate of interest may even become less than SB rate(Some banks are paying 7 % on SB account)
    No person having sense will invest in RDs if this is implemented. A good financial adviser is lagging in the ministry of Finance and Income Tax department. KLet them go to a person purchasing Innova car by paying full amount by cash and they will find 100 times more tax evaded by such persons.

    • Dear Mandagaddeshankar,
      I disagree with your views on “TDS & RD”. Without TDS also, an investor is liable to pay taxes right? He/she has to include the interest income in Income Tax Returns and has to pay the taxes as per income tax slab. It is just that Govt has made RDs on par with FDs with respect to TDS. Kindly share your opinion..

      • PNB & Central Bank of India are having Flexi recurring deposit schemes. In these schemes though flexi RD is of 5 years period, there is no need to deposit installment every month. In this account we can deposit 9 times monthly installment amount in a month. A number of accounts can be opened by a person. A person who is retired and he received at the time of retirement Rs. 50 lakh as Provident fund, Gratuity, Leave encashment at the time of retirement. He deposited entire amount in flexi recurring deposit. because earlier Income tax on interest on RD was allowed to pay on maturity. Now Bank would deduct 10% TDS on Interest. The interest on RD is required to be added to Income. Thereafter, if depositer is in 20% tax slab, he is required to pay additional 10% towards Income tax. Since he has deposited entire saving in Flexi RD, where from he would bring money to pay additional Income tax on 10% amount of Interest

        In case the depositor is in 20% tax slab, Bank would deduct 10% Income tax. But where from he would bring fund to pay remaining 20%
        ed by one person in

        • Dear Bhole,
          Just because a person has invested all his/her savings, does not mean he/she can escape to pay taxes. You need to plan your taxes, no other go.
          Death & Taxes are certain.

      • Dear Sreekanth,

        Don’t you think there is a point in what Mr Mandagaddeshankar says about maturity value of RD. If TDS is deducted, the amount that earns interest is reduced to that extent as soon as TDS is deducted, so, every TDS will successively reduce amount on which interest is earned and also in turn interest earned and will reduce maturity value substantially. This will reduce yield to a good extent.

        Thus it is highly unfair to a person who is not eligible to submit 15G 0r 15H and will deter One from investing in FD or RD.

        Your comments please.

        Thanks.

        • Dear Mahesh,
          If TDS is not applicable, does not mean that there is no tax liability right?
          If an individual does not have taxable income, and in case bank(s) deduct TDS, that person can claim the refund by filing Income Tax Returns. (or) He/she can submit Form 15 G or H. Hope you got my point??

  • Dear Shreekant, I found your article very informative. As per the budget for 2015-16, interest on RD has also been brought under tax purview wef June 2015.
    My query is wheth all RDs opened before 01.06.2015 will also be brought under the ambit of the tax?
    Please clarify.
    Vidhu Mohan

    • Dear Vidhu,
      Thank you for your appreciation.
      Banks issue TDS (Tax Deducted at Source) certificates if interest income is more than Rs 10,000 in a Financial year. So if your RD earns
      more than Rs 10k in Financial Year 2015-2016 (April 15 to Mar 16), Banks will deduct TDS and issue TDS certificates to you. If you are not a tax assessee, you can claim the refund when you file your Income Tax Returns before July 2016. (Else you can also submit Form 15G/H to avoid TDS).

  • Dear Sir,

    i am read more post and SSA Plan information very easy and smoothly word giving. i am very gladly thanking to you sir.

    I have invest to yes bank FD And RD scheme.
    i have monthly installment 10000 Rs. and Also creating the 55000 Rs. FD
    so how much deduct the TDS bank.

    Please which plan is better in future investment.
    Please suggest…

    • Dear Satish,
      Thank you for your appreciation.
      Banks will deduct TDS @ 10% (both on RDs & FDs) starting from June 2015. But the actual taxes can be different (depends on your income tax slab/rate).
      Kindly read the post again and understand about the tax implications.
      Kindly let me know about your future financial goals and the investment horizon (time-frame..??

  • Sir,

    I would like to open SIP account to reach my below goals
    Goal 1: child higher education – (time span 15 yrs) fund require 25 Lacks.
    Goal 2: generate my retirement fund – time span 25 years-fund target upto 50 Lacks
    Goal 3: generate fund which i can gift to my child when he start his family life – 30 years

    I have read your blog related to SIP investment. I am new investor & would like to open SIP account for above goals. i can invest max rs 1500/- PM in 1 or more SIP (500-500). can you suggest to me which funds i have to choose for my portfolio? Please advise how i can set my portfolio for above goals.?

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