Is there any TDS on Recurring Deposits?

  • Recurring Deposit
  • 1 Months ago
TDS on Recurring Deposits
HIGHLIGHTS

  • 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%.

Features of Recurring Deposits in India:

  • It makes an individual learn to make savings.
  • The minimum amount of recurring deposit one can start with is Rs 500. It is a kind of budget-friendly scheme.
  • The tenure of the recurring deposit ranges from 6 months and goes up to 10 years.
  • The rate of interest applicable to recurring deposits is higher in any other savings scheme.
  • The recurring deposit is giving almost 80 to 90% of the return. On maturity, the amount gets credited to the bank’s account.

Know about tax-saving recurring deposits: Tax Limits on Recurring Deposits

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:

  1. If your annual income is less than 2.5 lakhs: If people’s income is less than 2.5 lakh, TDS on RD interest applicable is 10%, which is above Rs 10,000. To avoid any tax payments, submit form 15G.
  2. If your annual income is between Rs 2.5 lakh- Rs 5 lakh- If your annual income falls in this range, then the TDS on RD interest is 10% of the total income earned on the principal amount.
  3. If annual income ranges between Rs 5 lakh to 10 lakh- For the people who are having annual income ranging between 5 Lakh to 10 Lakh, TDS on RD account applicable is 20%. The bank will make a deduction of only 10%, the rest is to be paid while filing ITR.
  4. For annual income exceeding Rs 10 lakh: If the annual income ranges in this slab, then the TDS on recurring deposit is 30%. The bank will make a deduction of only 10%, the rest is to be paid at the time of filing an income tax return.

In what scenarios TDS is deducted on recurring deposits?

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.

Know about Form 15G, Form 15H, and Form 16A: How to save tax on recurring deposits?

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.

Who all are liable to fill Form 15G?

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:

  • Must be a resident of India for filling Form 15G
  • Only Indian residents who are below the age of 60 years can fill Form 15G.
  • Even Hindu Undivided families are also liable to fill Form 15G

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.

Form 15H

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.

Main components of 15H form

  • Individual’s name
  • Investment details
  • Dates of investment
  • Estimate of the amount earned through investments
  • Occupation details
  • Age
  • Details of the latest assessment year
  • Declaration

Who all are liable to fill Form 15H?

  • Must be a resident of India; an NRI is not allowed
  • Must be above the age of 60 years old as the form is designed for the convenience of senior citizens only.
  • All those senior citizens who have a nil tax liability on the computation of final tax are liable to file Form 15H.
  • Overall interest earned annually on all the saving instruments must fall under the prescribed limits as defined by the Income Tax Department of India.

Form 16A

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.

Frequently Asked Questions 

  • Are there any TDS applicable on recurring deposits?

Yes, TDS is applicable on recurring deposits.

  • Is TDS applicable on interest earned on recurring deposits?

Yes.  If the interest earned is above Rs 10,000, TDS is applicable on interest earned on recurring deposits.

  • What is the minimum tenure for making recurring deposits?

The recurring deposit tenure ranges from 6 months to 12 months.

  • How much interest one can earn on investing in recurring deposit schemes?

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.

  • What is the minimum amount one can invest in a recurring deposit?

The minimum amount of investment that can be done in the recurring deposit scheme is Rs 10.

  • Do senior citizens get any extra benefit on making recurring deposits?

Yes, the interest rate applicable to senior citizen recurring deposits is higher as compared to individuals below the age of 60 years.

  • Does the bank allow you to withdraw recurring deposits before maturity?

Yes, one can close the recurring deposit at any point in time. Interest will be paid till that time only.

  • How are banks calculating the maturity amount on recurring deposits?

The banks are calculating the maturity amount based on the account type, installment, and tenure of the deposit.

  • Can one add nominees also in the recurring deposit?

Yes, you can add the nominee.

  • How to save tax on recurring deposits?

If you are doing a recurring deposit either for medium or long-term tenure, then tax gets saved on recurring deposits.