RD Tax Calculation

POSTED BY sonadhi ON April 24, 2013 5:56 pm COMMENTS (13)

Hi,

I have few questions regarding the RD.

1) TDS is not applicable for RD.Do we have to declare it as other income?

2) When Tax is applicable on RD,after how much interest value,tax is applicable.

3) Is it really a good practice to open different RD’s at various banks/locations to save the Tax.

4) Can we not continue the RD more than 5 years?

Thnx,

Sona

13 replies on this article “RD Tax Calculation”

  1. Dear Ashish, yes is the answer.

    Thanks

    Ashal

  2. Dear Ashish, you can opt either to pay income tax on yly basis or at the end of the term, which ever is favorable to you. In all probability, the yly method ‘ll bed tax friendly for you as after 5Y term, your tax slab may not remain the same.

    To get the accrued interest details, you may check it from your netbanking.

    Thanks

    Ashal

    1. Ashish says:

      Dear Ashal,

      Thanks for your response.

      I am currently in 30% bracket and in future, if our FM does not change the slab structure or the HR reduces my income structure, I hope to remain in 30% ;-). But still I think your suggestion of paying yearly is better since it will reduce the tax burden mentally.

      Ashish

    2. According to this

      http://law.incometaxindia.gov.in/DitTaxmann/incometaxacts/2007itact/sec_056.htm

      taxation on deposit schemes is always on accrual basis

      I would conclude RDs are taxes just as Fds and SB account.

      Can you point me to a source which says otherwise?

  3. Ashish says:

    Hi,

    In continuation to the above question, I would like to know when to pay the taxes on interest generated from RD.

    I had opened an RD in Feb 2012 and have been paying Rs.3000 per month. There is some amount of interest generated on the amount paid till now (which I don’t know as it is not credited to my account). I hope that the full amount (principal + interest) would be paid at the end of term i.e., 5 yrs.

    I want to know should I pay the income tax on interest income only when it is paid to me or should I pay it yearly (respective AY/FY). If I can pay yearly then how do I know the interest amount for a particular FY/ AY.

    Please suggest.

    Ashish

    1. Ashish,

      I have an RD calculator which does this. If you want it, send me an email.

  4. Dear Sonadhi, hope you have got the answers for your RD taxation. if still you are having some doubts, please fel free to ask.

    thanks

    Ashal

  5. Sumit says:

    1) Yes TDS is not deducted by banks, but its taxable
    2) You still have to include this total income in your tax return and pay tax
    3) Don’t know – how different RD’s at various banks saves tax. – The interest earned from RD is taxable on your hand- so anyway you should have been paying the taxes.
    4) Maximum tenure of RD is 10 years

  6. 1) TDS is not applicable for RD.Do we have to declare it as other income?
    YES.

    2) When Tax is applicable on RD,after how much interest value,tax is applicable.
    Any interest however small. Same as FD

    3) Is it really a good practice to open different RD’s at various banks/locations to save the Tax.
    No. Meaningless

    (Some dumb people open several FDs for small amts to escape 10% TDS. Dumb because entire interest earned is taxable whether bank deducts TDS or not)

    4) Can we not continue the RD more than 5 years?
    Max limit is 10 yrs as of now

    If you want a RD calculator with tax calculation, I will post one in my blog soon.

    1. Syamantak says:

      Pattu,

      🙂 🙂 waiting for the calculator. I have been looking for something of that sort for quite long

      1. It will take me a little while to post. If you send me a mail, I will send it to you.

        1. Syamantak says:

          My honour .. but how do I get your email id? this forum doesnt show much info about the users and we don’t have option for PM as well..

          1. Don’t you see it when you click on ‘Free Financial Calculators’?

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