No TDS on post office Recurring Deposits (RDs)
Before, stepping into TDS exception first thing needs to be clear is proper explanation of recurring deposit. Many have this confusion when it comes to differentiate Recurring deposits and fixed deposit. Just like the fixed deposit, recurring deposit’s too required fixed amount of fixed tenure to be deposited in separate RD account where the whole amount and the accumulated interest will be obtained after the maturity period, but here that fixed amount needed to be contributed periodically which is every month to the relevant RD account.
Indian Postal department offers such RD facilities in Post offices across the nation under the name of Post Office Recurring Deposit Account. All Banks also offer this facility. Until previous 2015 financial year budget, post office RD accounts are treated similar to the bank RD account. But in 2015 Union budget, the RD accounts of Post offices gets exceptions from TDS. Experts across the nation believed that this No-TDS on Post Office RD account government proposal will boost RD account opening by Indian people across the nation, and some believed that in order to increase the post office revenue central government might handled this typical play.
Post office away from the ambit of TDS
It is really happy news for those people who prefer post office for earning extra amounts as interests from their fixed deposits. In case of post office RD scheme, the responsibility of paying tax on the interest wage is on the taxpayer. Further, he needs to include the interest income from RDs in the total earnings while calculating the tax accountability.
- If the interest rate of the recurring deposits exceeds beyond Rs.10,000 might required 10% of deduction as in form of TDS.
- The Government has keep post office recurring deposits away from the domain of TDS to promote small savings like RDs
Various measures to promote small Recurring Deposits
In response to the query solicited in Lok Sabha, Jayant Sinha, Minister of State for Finance said, The Government intends to promote the recurring deposits scheme with more innovative methods and procedures.
|1||Time Period of Recurring Deposit Offered by India Post||5 Years|
|2||Minimum Amount for opening RD Account In post office||Rs.10 /-|
|3||Pattern For Fixing RD Amount||Amount must be multiples of 5|
|4||Maximum Limit for RD Investment||No Limit|
|5||Nomination Rules||Flexible Customer can add at any time|
|6||Pre-Withdrawal||Customer can withdraw upto 50% after completion of 1 year|
|7||Eligibility||Customer must be Minimum 10 years old|
|8||Rate of Interest offered for Post Office RD account for Fy 2016-17||8.4%|
Further, government takes several measures on constant basis to popularize and encourage all small savings schemes including post office post office RDs. These sorts of measures create great awareness about deposit schemes through print and electronic media. It also provides training, meetings, holding seminars to the assorted agencies involved in mobilizing deposits under these plans. In the meantime, bank recurring deposits will inspire TDS on interest earned of over Rs. 10, 000. Taxable is present in both post office and bank recurring deposits. Individuals who are searching for monthly savings on regular basis can prefer post office recurring deposits instead of bank recurring deposits. You would have to include the interest so earned to find out your tax accountability in the future.
|Sno||Parameters||Post Office RDs||Bank RDS|
|1||is allowed to open||Yes||Yes|
|2||is TDS deducated||No||Yes|
|3||Do we have to pat tax||Yes||Yes|