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. But, this provision will be amended soon.
The budget 2015-2016 has put RDs (Recurring Deposits) at par with FDs (Fixed Deposits) for TDS (Tax Deducted at Source) purpose. Banks will deduct TDS on Recurring Deposits (RDs) too, from 1st June, 2015.
If you receive more than Rs 10,000 as interest from your RDs, your bank will deduct Tax and directly pay this tax to the Govt of India (on behalf of you). You will receive TDS certificate (Form 16 A) from your bank.
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, depending on your income tax slab.
What is the additional income tax rate that you need to pay over and above the TDS? This is dependent on your income tax slab.
Important points to be noted ;
Read my article on “Recurring Deposit Taxes & Fixed Deposit Taxes” for a detailed explanation on various aspects of RD & FD taxes and how they work.
( Image courtesy of Stuart Miles at FreeDigitalPhotos.net)
This post was last modified on July 10, 2023 6:28 pm
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Sir
I have Rd with BOB monthly rs2000 in my 26as section 194A amount paid/credited Rs 1142 shown
But tax deducted is nil. Now I am in tax slab of 5 to 10 Laks whether I have to pay income tax how to pay how to show in itr please help me
Sir I tried to pay tax on line the by the challan 280 for the intrest on FD and RD after filling every thing in The bank site is asking to fill up penalty payment code as 11c or N11c
which code I have to choose 11c or N11c
Dear koteswara ..Without looking into the details, not advisable to suggest you. Kindly take help of a CA.
Dear Koteswara,
Yes, you have to disclose this income in your ITR under the head 'income from other sources'.
MY RD ACCOUNT FOR A OF PERIOD OF FIVE YEAR .AND THE INSTALLMENT DEPOSIT IN MY SALARY ACCOUNT FORM SBI. I WANT TO KNOW ABOUT THIS AMOUNT TAXABLE OR NOT. PLEASE GUIDE ME.
Dear Rajeev,
The interest income from RD is subject to TDS and it is taxable.
Kindly read: FDs & RDs - Income tax implications.
I have opened RD of Rs. 2000/ in SBI. they have charged accumulated interest. Why is it so? what is accumulate interest? Is it payable to customers or not?
Dear Ekta ..Are you referring to TDS? interest income on RDs is now tax deductible.
Kindly read this article : FDs & RDs - Tax implications.
Dear Sreekanth:
As per the latest rules, is TDS applicable on POST OFFICE Recurring Deposits ? Or is it applicable only for BANK RDs?
Pl clarify.
Thanks in advance
Dear Jeyaram..I believe that TDS is applicable. Read : Latest TDS rates chart 2016-17..
Dear Sreekanth,
Please clarify if TDS on RDs, as revised in Finance bill 2015 is applicable to NRIs also or they continue to remain exempted.
Thanks,
Dear SS..I believe that it is applicable to NRIs also.
sir, i have got a recurring account for a period of 2years.The total interest of which is more than 10,000/-.As per the new IT rule,tds would be deducted.but sir although my gross income is nearly 4lac per annum and showing the 80 c deductions ,my total tax payable is zero.now do i need to furnish a 15 G form to the bank so that no TDS is deducted out of the RD interest?
Dear Santunu,
As your expected income is more than Rs 4 Lakh, you should not submit Form 15G.
You can claim the refund (if any) of TDS which has been deducted when you file your Income tax Returns.
Mr Sreekanth,
I have RD that I opened for 15 months and is due maturity in Dec-2015. I am outside the country and also work outside.
1) Do I have to pay any other tax over my TDS?
Thanks,
Ketan
Dear Ketan,
If your TDS is say 10% and your total income (indian income) falls in 20% bracket, then you have to pay the differential tax amount when you file your ITR.
Kindly read : TDS & Misconceptions.
That brings up a question as to indian citizens who stay and work abroad and don't have any income (based on NOT getting any salary in india), how will they pay income tax or should they pay income tax?
Dear Ketan,
If they do not have any income (salary or any other form) from the sources in India, NRIs (if they are) are not required to pay any income tax.
Kindly read : NRI taxation rules.
Thanks for the insight Sreekanth. I truly appreciate your help. Keep up the good work.
Keep visiting dear Ketan :)
Dear Sreekanth
Below mentioned table is RD product of central bank of India. Now If I go for 1 year @7.75%, Rs 8000/m=1 lakh plus then what would be the maturity value scenario. I'm service man and fall in 10% IT rule.
Cent Lakhpati
Period in Years Rate of interest Monthly Installment (Rs.) Maturity Value (Rs.)
1 7.75 8000 Rs. 1 lakh Plus
2 7.75 3850 Rs. 1 lakh Plus
3 7.50 2480 Rs. 1 lakh Plus
would be very grateful to know from you.
Thanks.
Dear Niran..the maturity value is already provided right? May I know what exactly would you like to know?
Hi Sir,
I have the joint Post office RD with my wife from 2011 march onwards, I am salaried but spouse is housewife. Could you please help me to understand, whether TDS is applicable for us from June,2015 onwards Only and do I need to show only from june,2015 interest in the returns of my wife.
Dear Srini,
Kindly note that TDS is applicable from June 2015 only, but interest earned on RD has always been taxable.
Also, suggest you not to invest in RDs for long-term. Kindly read my article - Avoid investing in FDs/RDs for long-term.
Hi,
Sir i have RD in HDFC bank of 1000 Rs per month for the period of 5 years at the rate of 8.25%. So am i liable to interest income tax ?
RD will mature on September 2016.
Dear Kiran,
Do not invest in RDs for long-term, may I know why you have invested in RD, any specific financial goal?
Hi,
First of all thanks for reply. There is no specific financial goal. I am a student, so just for the savings purpose.
So should i liquidate it or wait for maturity. Thank you sir.
Dear Kiran,
If you want to accumulate wealth (assuming you can afford to take risk), consider investing future installments in a balanced fund SIP.
Keep the accumulated balance in RD/FD for your 'unforseen expenses'.