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Tax comparison on interest of RD FD and SA

Tax comparison on interest of RD FD and SA


ParticularsTax on Interest on
Fixed Deposit
Tax on Interest on
Recurring Deposit
Tax on Interest on
Savings Account
Applicability of TDSTDS @ 10% of InterestTDS @ 10% of InterestNo TDS
Income Tax Deduction allowedFull Interest TaxableFull Interest TaxableRs 10000 deduction
Income Tax on InterestAs per Slab RatesAs per Slab RatesAs per Slab Rates

Tax comparison on interest of RD FD and SA,check out now!

TDS on Recurring Deposits would be deducted @10% of the Interest earned. Earlier, TDS was not deducted on Recurring Deposits but with effect from 1st June 2015 – TDS on Recurring Deposits would be deducted @ 10% under Section 194A

Budget 2015 has introduced an amendment to Section 194A and now the meaning of the word Term Deposits includes Recurring Deposits and therefore TDS @ 10% would be applicable on Recurring Deposits. However, No TDS would be deducted on Interest earned upto Rs. 10,000 to safeguard the interests of the small depositors.

As a result of this amendment, the TDS on Interest earned on Recurring Deposits would now be the same as the TDS on Interest earned on Fixed Deposits.

Income Tax on such interest on Recurring Deposit would be levied as per the Income Tax Slab Rates of the person receiving the interest. The current income tax slab rates can be divided into the Nil category, 10% category, 20% category & the 30% category.

This income would also be required to be disclosed every year in the income tax return which is required to be filed before 31st July/ 30th Sept of the next financial year.

The person receiving the Interest on RD cannot claim any deduction on the same and tax would be levied on the full interest amount as compared to Interest on Savings Account on which a deduction of Rs. 10,000 is allowed.

Savings Account yield the lowest interest as compared to Recurring Deposits and Fixed Deposits and therefore an individual should not prefer to keep much amount in savings account as the interest earned is fairly low. A person should transfer money from Savings Account to Fixed Deposit if he has funds for a lump-sum investment or else transfer funds to Recurring Deposit if he can save a defined sum after every period.

Many financial planners have started advising their clients to place their surplus lump-sum funds in Fixed Deposits and also to start Recurring Deposit and Mutual Fund SIP’s in which deposit is required to be made every month as it inculcates the habit of saving every month.

Tax comparison on interest of RD FD and SA,check out now!

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  1. Anushi Aggarwal says:

    what others amendments are made under budget 2015 ? please give a brief reply.

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