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How is Interest on Recurring Deposits Taxed?

03 April 2015, Friday

There is a famous saying "If anything is free there will soon be a tax on it". The Government is smart. It looks for ways to tax returns on your earnings.

Do you know what is a recurring deposit?

A recurring deposit is similar to an SIP (Systematic Investment Plan) in a mutual fund. You want to invest in a fixed deposit but do not have sufficient money to do so.

A recurring deposit is similar to a fixed deposit, only you invest small sums of money regularly which earns an interest equal to a fixed deposit.

You will have to

first open a savings bank account in your bank. You deposit money into this savings bank account.

A fixed sum of money is deducted regularly (say each month) from your saving bank account and transferred to your recurring deposit.

A 5 year recurring deposit can fetch you an interest of 8.4% per annum.

How are recurring deposits taxed?

Currently you are not deducted any tax on the interest you earn from your recurring deposit (RD) account in the bank, Co-operative bank or even a Co-operative credit society in a year.

This means there is no TDS (Tax Deducted at Source) on the interest income you get from your recurring deposit.

Category: Taxes

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