Post Office Recurring Deposit Account

POSTED BY Niraj Kumar ON June 5, 2013 12:55 pm COMMENTS (11)

Hi Manish,

Would you like to write an artcle on Post Office Recurring Deposit Account?, Many people in my village are interested in it and want to know more about it.

I know below information about Post Office RDA:

Maturity value of a 5 Years RD account opened on or after 1.4.2013 with monthly deposit of INR.10/- shall be INR.744.53.(Rate of interest 8.30% )

Interest earned is tax free.

Need to make contribution on monthly basis, but four defaults are allowed, defaults can be paid within two months.

Advance Deposits earn rebate.

I would like to know:

1) How to calculate the rebate one will get?, Please make it simple with example as you always do.

2) If I start it in June 2013 and govt decide next year (or in future) to make the interest earned on Post Office RDA as taxable, will it be applicable for me also?.

3) Can I attach my Saving bank account with Post Office RDA so that every month the money get deducted automatically?

4) Who will pay the money after maturity and by what mode?

5) If Govt changes the rate of interest in future will it be applicable for me?

Thanks,

Niraj Kumar

11 replies on this article “Post Office Recurring Deposit Account”

  1. Dear Niraj, yes is the answer.

    Thanks

    Ashal

  2. Niraj Kumar says:

    Hi Ashal,

    Things are becoming clear to me now.
    so whatever money I transfer to him will be tax free for him, only the interest he earn from that money will be counted for his tax calculation…right?

    also, It means he can earn interest up to 2L without paying any tax.

    1. Its not as simple as that . If its found out that this transfer is done just to avoid the tax , then it will not be accepted . If you are in 30% bracket and your brother is in 10% bracket . govt does not get the fair share of their tax and it will be questioned , be ready with the answers !

  3. Dear Niraj, you are merely transferring your capital to your brother so 2.5L Rs. are tax free to him. As the earning is only 20K which is well below the 2L Rs. limit, it’s not at all taxable to your brother.

    thanks

    Ashal

  4. Niraj Kumar says:

    Hi Ashal,

    Thanks a lot, I really appreciate the detailed quick response on this website.

    One more question: If I transfer up to 2,50,000 to my brother who is unemployed, and he invest 1 lakh in PPF (for 80 C) and other 1,50,000 in some FD or something which gives him return up to 20 K. will he have to pay any tax? (as PPF will be tax exempted and 150 K Principal + 20k Interest fall under 1,80,000 tax free slab).

    Will I have to show anything in my Tax return If I transfer Rs 2,50,000 to my brother’s account?

    Sorry, these are very very basic questions, but I really want to know them, help me grow.

  5. Dear Niraj, section 80L has been abolished long back. Hence the interest is taxable. That’s the simple answer to your query. As the very start of your query was meant for tax free interest, which is not the case now, I assume rest of your query is insignificant.

    Regarding the Interest rate, once you enter in RD at a given rate, it’s locked for your term of 5Y. The new rate of interest ‘ll be applicable only on the new accounts opened after the notification of the new ROI.

    Thanks

    Ashal

  6. Niraj Kumar says:

    Hi Ramesh,

    Appreciate your quick response, Still I would like to know the answer of questions stated above.

    1. Ramesh says:

      Personally, I do not like FD/RDs. So, no more comments on this.

  7. Niraj Kumar says:

    Hi Ashal,

    https://www.caclubindia.com/forum/post-office-recurring-deposit-account-rda–98585.asp

    Please search for this string “Interest earned on this account is exempted from tax as per Section 80L of Income Tax Act.”

    1. Ramesh says:

      That was an old rule. From AY 2008-09 onwards, it is not applicable.

      Now it is taxable.

  8. Dear Nirav, how did you come to know that Interest from PO RD is tax free?

    Please indicate the source of info.

    thanks

    Ashal

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