To open a recurring deposit account with any bank, you need to have a savings account with the bank whose recurring deposit scheme you have chosen. You can deposit the money in your savings account, which will be deducted every month by the bank and transferred to the recurring deposit account
TDS on Recurring Deposit
Similar to most personal savings instruments and fixed deposit, recurring deposits to, attract tax. However, recurring deposits attract TDS, better known as Tax Deducted at Source. TDS is also known as the income tax which is applicable for Indian citizens, under The Income Tax Act of 1961. These laws stay the same, except minor amendments and adjustments in the taxation slab.
Income Tax on Recurring Deposit Amount
The money that is invested in a recurring deposit every year, will be counted as a part of the yearly income of the investor. A TDS (Tax Deducted at Source) of 10 percent is deducted on the interest you earn on your recurring deposit. The TDS is not deducted if the interest you earn on your recurring deposit is up to Rs.10,000. The TDS will be 20 percent, if you fail to provide the PAN information to the bank.
If their income falls under the non-taxable income slab, they still have to submit the Form 15G to be taxed for both fixed and recurring deposits.
Form 15G Form 15H and Form 16A
Form 15G is a must if you want to save taxation on your income. However, From 16A is a form that is filled and provided to you by your employer, who deducts the TDS from your income. Note, that regardless of being eligible for TDS on your income, you will be provided with the Form 16A. Also, keep it in mind that the Form 15G is applicable for people who are under 60 years of age. Form 15H is a similar form for ITR submission, like Form 15G, but is only meant for people who are 60 years and over (senior citizens).
Current Income Taxation Slab 2017-18: Resident Individual Below The Age of 60 Years
To get you knowing whether you need to furnish the Form 15G and submit it for your income tax, checkout the income taxation slab below:
| Annual Income (in Indian Rupees) | Tax Rate | TDS on Recurring Deposit Interest Earned (if interest is more than Rs.10,000) |
|---|---|---|
| Less than Rs. 2.50 lakhs | Not Applicable | 10% |
| Between Rs.2.5 lakhs and Rs.5 lakhs | 5% of sum exceeding Rs.2.5 lakhs | 10% |
| Between Rs.5 lakhs and Rs.10 lakhs | 20% of sum exceeding Rs.5 lakhs | 10% |
| Over Rs. 10 lakhs | 30% of sum exceeding Rs.10 lakhs | 10% |
* As of April, 2017
Surcharge:
10% of income tax, where total income is between Rs. 50 lakhs and Rs.1 crore.
15% of income tax, where total income exceeds Rs. 1 crore.
Recurring Deposit Tax Exemption
There are certain instruments that are categorized as recurring deposit with income tax exemption, although rare. People do look for tax saving recurring deposits to make sure that their savings are not wasted. Unfortunately, very restricted amount of information is available on recurring deposit interest is taxable or not.
Tax Exemption on Post Office Recurring Deposit Scheme
Tax exemption for your recurring deposit is only possible if you invest in RD with India Post. It should also be at least a 5-year scheme. This is possible under Section 80C of the Income Tax Act of 1961. The maximum taxable deduction can be for Rs. 1,00,000 which will all the savings investments that are eligible for tax deduction under Section 80C.
