Categories: BankingFixed Income (FD,RD,PF..)

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

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?

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?

  • 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) 

This post was last modified on July 10, 2023 6:18 pm

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 14 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. The information provided, therefore, should not be viewed as financial, legal, accounting, tax or investment advice."

View Comments

  • 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 Shreekanth,

            As per your last reply, Maturity date is in this FY 2016-17 (Dec-16).

            But I think Dec-16 should fall in AY 2017-18. Please correct me if I am wrong.

            Thanks,
            Nikhil

          • Thanks Sreekanth, that was my fault. I misunderstood your sentence.

            Thanks again.

  • 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 Priyadarsine,
      As the TDS has already been deducted, it gets reflected in your Form 26AS.
      So, you have to provide these TDS detail in your ITR of AY 2016-17.

1 … 3 4 5 6 7 … 10
Leave a Comment
Share
Published by
Sreekanth Reddy
Tags: FDFD taxesFixed DepositsFY 2018-19 Section 80TTBinterest income on recurrind depositis RD interest taxableLatest post office interest ratesPopular Investment OptionsRDRD interest in ITRRD on minorRD taxesRecurrind depositstaxes on RD maturityTDS on RDTDS on recurrind deposits
July 10, 2023

Recent Posts

ITR Belated vs Revised vs ITR-U – Which One Should You Choose?

Filing your Income Tax Return (ITR) is not just about meeting deadlines—it’s about choosing the…

April 29, 2026

Best Pension Schemes in India (2026) – EPS, NPS, APY Explained

Retirement planning in India is often misunderstood. Many people think any long-term savings or investment…

April 24, 2026

Property Valuation Guide: How Your Home Is Really Valued

You’ve probably seen the same property quoted at different prices. One person says ₹60 lakh,…

April 21, 2026

Moratorium Rule in Insurance – When Can Insurers NOT Reject Your Claim?

Buying insurance is easy. Getting your claim settled—that’s where the real test begins. For any…

April 15, 2026

Immovable Property Gifts Above ₹45 Lakh Now Under SFT: What Changes from 1 April 2026?

Gifting immovable property—like land, plots, or houses—is super common in India. Families often do it…

April 11, 2026

The ETERNAL Financial Planning Framework: A Practical Approach to Building Long-Term Wealth

Most people believe that investing alone is enough to create wealth. But in reality, many…

April 9, 2026

This website uses cookies.