03 April 2015, Friday
There is a famous saying "If anything is free there will soon be a tax on it". The Government is smart. It looks for ways to tax returns on your earnings.
Do you know what is a recurring deposit?
A recurring deposit is similar to an SIP (Systematic Investment Plan) in a mutual fund. You want to invest in a fixed deposit but do not have sufficient money to do so.
A recurring deposit is similar to a fixed deposit, only you invest small sums of money regularly which earns an interest equal to a fixed deposit.
You will have to
first open a savings bank account in your bank. You deposit money into this savings bank account.
A fixed sum of money is deducted regularly (say each month) from your saving bank account and transferred to your recurring deposit.
A 5 year recurring deposit can fetch you an interest of 8.4% per annum.
How are recurring deposits taxed?
Currently you are not deducted any tax on the interest you earn from your recurring deposit (RD) account in the bank, Co-operative bank or even a Co-operative credit society in a year.
This means there is no TDS (Tax Deducted at Source) on the interest income you get from your recurring deposit.