Is RD Taxable? Explain

Recurring Deposit (RD)
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Is tax deducted on recurring deposit?

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Yes, your recurring deposit returns are fully taxable. But remember, they don’t fall under Section 80C benefits. Instead, they are taxable under the segment ‘Income from Other Sources’.

The bank will deduct 10% TDS if your interest income on RDs is equal to or above ₹40,000 and you belong to the group ‘General Residents’. For senior citizens, the income threshold is slightly higher, which is ₹50,000. It is for one fiscal year.

Do not forget to submit your PAN details. Otherwise, you will face a 20% TDS deduction on your accumulated interest. However, I can tell you lots of smart ways to avoid TDS on RD.

  1. Fill the form 15G if you are a non-senior citizen, and form 15H if you are above 60 years old. Only one clause! Your total income should be under the tax-free threshold.
  2. The bank won’t deduct any TDS if the interest you earn from a single RD in one fiscal year is ₹10,000 or smaller. So, I suggest diversifying your investments in multiple RDs.
  3. Also, collect the Form 16A from your bank branch before completing your Income Tax Return. This form explains all TDS deductions on your recurring deposits. Go through it and avoid mismatches.
  4. I also registered an RD account on behalf of my wife, or minor, whose income is NIL, to avoid tax.

So, apply any of these tricks and avoid the taxes on your recurring deposits.