Tax on Recurring Deposit Interest Rates 2025

Any bank can accept recurring deposits, which are free of market risk. Any amount of cash may be placed each month, and banks assign an annual interest rate that will accrue and be paid to the account holder on a quarterly or half-yearly basis.

You must have a savings account with the bank whose recurring deposit plan you have chosen in order to create an account for recurring deposits with any bank. You can put the cash in your savings account, from which the bank will withdraw money each month and send it to the account for regular deposits.

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 (RD)

Similar to most personal savings instruments such as fixed deposits, 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 for minor amendments and adjustments in the taxation slab.

1. When PAN Card is provided - TDS is decreased by the bank at a 10% rate. For regular people, the TDS threshold is Rs.40,000. In other words, if interest income exceeds Rs.40,000, the bank will lower TDS. If not, TDS won't be decreased and there won't be any interest paid into the investor's bank account. For older citizens, the TDS threshold is Rs.50,000.
2. When PAN Card is not provided - If the PAN Card is not provided, the bank deducts TDS at a rate of 20%. The TDS threshold level is Rs.40,000 for normal residents and Rs.50,000 for senior people. 

Income Tax on Recurring Deposit Amount

The amount of money deposited in a recurring deposit each year will be included in the investor's yearly income. Your interest on your recurring deposit is subject to a TDS (Tax Deducted at Source) of 10%. If the interest, you get on your recurring deposit is less than or equal to Rs. 10,000, no TDS is taken. If you don't give the bank your PAN information, the TDS will be 20%.   

Investments in bank RD are not exempt from taxation under Section 80C of the Income Tax Act of 1961. Therefore, any investments made in recurring deposits of any bank are not deductible from income. However, a post office recurrent deposit with a five-year period is qualified for a tax deduction under Section 80C of the Income Tax Act of 1961. Consequently, purchasing post office TDS gives the investor tax savings of up to Rs.1.5 lakhs. 

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.

The interest earned from a recurring deposit scheme can be taxed. The applicable tax rate is based on the tax slab rates for individual investors.  

Also, Check - Tax on FD  Rates

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).

Form 15G conditions :

1. Tax on total income is zero 
2. Indian citizen 
3. Age should not be more than 60 years 
4. An individual/trust/HUF or any other assessee. No company or firm. 

Form 15H conditions: 

1. Indian resident 
2. Tax on total income is zero 
3. Tax payer should be a senior citizen (should be 60 years or older) 

Current Income Tax Slabs for FY 2023-24: Resident Individuals Below 60 Years (New Regime)

To get you knowing whether you need to furnish the Form 15G and submit it for your income tax, checkout the income tax slab 2023-24 below:

Surcharge:

10% where total income is between Rs. 50 lakhs and Rs.1 crore.

15% where total income is between Rs.1 crore and Rs.2 crore

25% where total income is between Rs.2 crore and Rs.5 crore

37% where total income is between Rs.5 crore and Rs.10 crore and above

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.

For Example - Say you earn an interest of Rs.20, 000 on your recurring deposit for a year and your annual income is Rs.3, 00, 000. This means you are liable to pay an income tax of 10 percent on Rs.50, 000 (No tax up to Rs.2.5 Lakhs), which amounts to Rs.5000 and TDS of Rs.2000 is deducted on the interest earned on your recurring deposit. So, at the end of the year you have to pay Rs.3000 to the government as income tax. The bank will give you a TDS certificate proving that you have paid the Rs.2000 to the government already.

Tax on Indian Post Office Recurring Deposit (RD)

A post office savings program supported by the government is called Post Office Recurring Deposit (PORD). Up to a duration of 60 months, investors can make monthly small-amount investments. Under Section 80C of the Income Tax Act of 1961, investments in Post Office RDs are not eligible for a tax exemption. The depositor, however, must pay taxes on the interest income. It is taxable at the investor's applicable income tax rate. 

How to Calculate the TDS on RD 

Tax Deducted at Source, or TDS, refers to the tax that the bank withholds and sends to the income tax division. The TDS threshold level for common persons is Rs.40,000 annually. For senior citizens, the annual TDS cap is Rs.50,000. TDS will be taken out of the interest income at a rate of 10% if PAN Card information is provided. 20% TDS is applied if not.

How to Declare Interest from an RD in your ITR 

It is required to include income from other sources when completing income tax returns. Any income that does not fit into the other four categories is referred to as revenue from other sources. Some examples of income from other sources are dividend income, interest from FDs and RDs, and interest from savings bank accounts. 

Interest from RD is included under the "Income from other sources" heading on the ITR form. The entire interest earned on all deposits must be entered under this heading. The post office branch also offers interest certificates. 

Interest from RD is included under the 'Income from other sources' heading on the ITR form. The entire interest earned on all deposits must be entered under this heading. The post office branch also offers interest certificates. 

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