The Union Budget presented by Finance Minister Arun Jaitley proposes to bring recurring deposits under the provisions of TDS (tax deducted at source). As a result, if interest earned on recurring deposits exceeds Rs. 10,000 a year, TDS at the rate of 10 per cent would be deducted by the bank.
Recurring deposit is a special kind of deposit offered by banks and post offices in which investors deposit a fixed amount every month into their accounts. Some banks offer recurring deposits for tenures of up to 10 years.
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Particulars
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Tax on interest of Fixed Deposit
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Tax on interest of RD
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Tax on interest of Saving A/c
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TDS applicability
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TDS @10% on interest
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TDS @10% on interest
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No TDS
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Income tax deduction allowed
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Full interest taxable
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Full interest taxable
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Rs. 10000 deduction
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Income tax rate
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As per income tax slabs
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As per income tax slabs
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As per income tax slabs
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The proposal to tax recurring deposits, a favourite saving instrument for salaried and middle class Indians, will come into effect from June 1.
Earlier, only fixed deposits in banks or post offices came under the ambit of TDS.
Investors with no taxable income will have to submit Form 15G to avoid TDS on both recurring deposits and fixed deposits. For senior citizens, the requisite form for avoiding TDS is 15H.
