Don’t worry – No TDS on Post Office Recurring Deposit Scheme, No TDS on Post office RD’s, Earlier TDS was not deductible on Recurring Deposits. However, since the new budget has altered the definition of time deposits & included TDS in the same, TDS is required to be deducted on RD’s now with effect from 1st June 2015.
The TDS in such cases is required to be deducted at 10% if the interest amount exceeds a sum of Rs. 10,000/- for the entire year for a particular assessee.
However, a special exemption here is granted to the Post Office Recurring Deposits. Only if a Recurring Deposit Account is opened with the Post Office Department, TDS will not be deducted.
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The details of the same are as under:
1. What is a post office Recurring Deposit?
For this you should first be clear with what is a recurring deposit. Recurring deposit is just like a piggy bank where you can deposit a fixed amount for fixed tenure and you will get the whole amount together along with the accumulated interest after the maturity. When amounts are contributed periodically to the RD Account, generally, every month, it is termed as a Recurring Deposit.
The post office department also provides us with the facility to open a RD. This is called a post office Recurring Deposit Account.
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2. What is the duration of such a RD?
Well, you can choose the duration of your choice from the available options which are 1 year, 2 years, 3 years or 5 years.
3. What is the Rate of Interest offered by post office RD?
The post office RD offers a fixed interest rate which is currently 8%. The rates are notified by the department every year. Compounding of Interest is done on a quarterly basis in the case of Post Office RD.
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4. Is Post Office RD Interest exempt from taxation?
No! The post Office RD interest is not exempt from Income Tax. It is just that TDS will not be deducted by the Post Office Department. The Tax on the same has to be paid by the investor himself.
Here is a table which summarizes the Taxation on Recurring Deposit Scheme:
|Particulars||Bank Recurring Deposits||Post Office Recurring Deposits|
|Taxable||Yes. Income tax is chargeable on the same.||Yes. Income tax is chargeable on the same.|
|TDS||Yes. TDS will be deducted at 1 % by the bank if interest crosses the limit of Rs. 10,000/-.||No. TDS will not be deducted as the special exemption is available to a post office RD account.|
|Liability of Paying Tax||On Banks. As the banks have collected TDS, the liability to deposit the same with the Government will be with the Bank.||On Taxpayer. As no TDS has been deducted, the liability for income tax on the same will be calculated & paid by the investor to the Government. The post office will have no role & thus no liability in such a case.|