Well you know that interest earned more than Rs. 10,000 per annum under fix deposit scheme supposed to be TDS at a rate of 10% u/s 194A, but the same wasn’t in the case of RD. But in the Union Budget 2015-16 presented by Finance Minister Arun Jaitley proposed 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% would be deducted by the bank. Interest earned on deposits in cooperative banks has also been brought under such TDS.

U/s 194(3) is what under which TDS on recurring deposit will be applicable and the same is effective from June 1, 2015. Anyways, i Interest earned on RDs has always been fully taxable. Just like FD interest income and savings account interest income it gets added to your Income from Other Sources (upto Rs. 10,000 interest earned on Saving Account is not taxable u/s 80TTA).

Another important thing is, if you fail to provide PAN information to the deducter, then TDS shall be deducted at 20%. If you no taxable income can submit either Form 15G or Form 15H (applicable for senior citizens) to avoid TDS, just like it has been done in case of fixed deposits.

TDS will be levied on Recurring Deposits wef June 1, 2015

Leave a Reply

Your email address will not be published. Required fields are marked *

Read previous post:
Interest Rates of Small Savings Schemes for Financial Year 2015-16

For the Financial Year 2015-16 i.e. w.e.f. 1st April, 2015, Government has notified the revised interest rates applicable for various...