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No TDS on Post Office Recurring Deposits

 

Post Office Recurring Deposit Tax Exemption

In Budget 2015, one of the major changes was to put recurring deposits under the ambit of TDS. Earlier TDS was used to be deducted on the interest earned from fixed deposits as well as savings bank account but via budget 2015, definition of Term/Time Deposits was amended to include recurring deposits and levy same tax as on other term deposits.

Budget 2015 had not clarified whether the TDS is to be deducted from interest earned on recurring deposit scheme of banks or post office or both. It simply takes recurring deposits under the purview of TDS irrespective of being bank recurring deposits or postal recurring deposits. But this had dissuaded people to save and invest in small savings scheme like recurring deposits.

 

So to make the recurring deposits alluring again Central Government in response to the question asked in the parliament on the imposition of TDS on Recurring Deposits by Post Office responded that TDS is not to be deducted from the interest earned on the post office recurring deposit.

Succinctly, The onus of paying tax on the interest income is on the taxpayer in case of post office recurring deposit scheme and he should include the interest income from recurring deposits in the total income while calculating the tax liability.

Tax on Recurring Deposit Scheme

ParticularsBank Recurring DepositsPost Office Recurring Deposits
TaxableYesYes
TDSYesNo
Liability of Paying TaxOn BanksOn Taxpayer

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