- Tax Limits on Recurring Deposits
- In what scenarios TDS is deducted on recurring deposits?
- How to save tax on recurring deposits?
Recurring deposits are the best way to make a small number of investments every month. Especially when you start a new job and are looking for ways to save money. This investment scheme is available with almost every bank and NBFCs of India. The rate of interest of recurring deposit schemes varies from 5.00% - 7.85%.
The interest earned by the applicant on recurring deposits is taxable. TDS charges on recurring deposits are calculated based on the income per annum of the recurring deposit. There are mainly three forms of income tax slabs under which TDS applies to recurring deposit:
The TDS on recurring deposits is deductible at a 10% rate on the interest earned according to Section 194 A of the Income Tax Act 1962. In case your interest earned on TDS is above Rs. 10,000, only then you are liable to pay TDS to the government of India. The money one is investing in recurring deposits is added to the yearly income of recurring deposit holders. There is a penalty of 20% TDS on recurring deposits if you are not sharing your PAN details at the time of making recurring deposits with the bank.
If you do not fall under the taxation slab, but still, the bank is deducting TDS charges on recurring deposits, you should submit Form 15G with the bank. If you do not know what TDS is and how it works? Here is the explanation.
TDS is Tax deducted at Source that is applicable for the residents of India who were falling under the taxation slab. Be it any personal saving instruments, fixed deposits, or recurring deposits, you are liable to pay TDS on the same.
To avoid TDS deduction, Form 15G must be submitted to the bank as proof that you do not fall under the taxation slab. Each year, a new form 15G is required to be submitted as it is a declaration form only for one financial year.
The Form 15G is required to be submitted only to those who are willing to save their TDS deductions on interest earned on recurring deposits:
This Form 15G works only for those who earn the interest on recurring deposits up to Rs 10,000 annually. There are certain exemption limits defined in the income tax slabs for aggregate income, including interest.
If you are a senior citizen and want to save TDS charges on interest earned on a recurring deposit, then you are liable to file Form 15H.
Form 16A is provided by those who are liable to deduct TDS. It specifies all the sources of income earned by the taxpayer. Form 16 A issued in case TDS is deducted for a recurring deposit, fixed deposit, any insurance commission earned, rent receipts, or any income you are getting on TDS.
We, at Shriram City Union Finance Limited, are also offering recurring deposit schemes at the best interest rates for the tenure of 12-60 months. We have 45 years of experience in the Indian Financial market. The recurring deposit offered by us is of high credit rating quality. Contact us anytime, we will assist you in the best possible way.
Yes, TDS is applicable on recurring deposits.
Yes. If the interest earned is above Rs 10,000, TDS is applicable on interest earned on recurring deposits.
The recurring deposit tenure ranges from 6 months to 12 months.
The rate of interest on recurring deposits varies from one financial institution to another. Higher is your monthly recurring deposit, the more the interest earned.
The minimum amount of investment that can be done in the recurring deposit scheme is Rs 10.
Yes, the interest rate applicable to senior citizen recurring deposits is higher as compared to individuals below the age of 60 years.
Yes, one can close the recurring deposit at any point in time. Interest will be paid till that time only.
The banks are calculating the maturity amount based on the account type, installment, and tenure of the deposit.
Yes, you can add the nominee.
If you are doing a recurring deposit either for medium or long-term tenure, then tax gets saved on recurring deposits.