Recurring-deposit (RD) interest is taxable even when your bank deducts no TDS. For interest credited or paid on or after 1 April 2025, a bank, banking co-operative or post office generally starts deducting TDS when your annual aggregate time-deposit interest crosses ₹50,000 (₹1,00,000 for a resident senior citizen). The limit applies to the relevant institution’s aggregate interest, not automatically to each RD. TDS is only an advance collection; your final tax is determined when you include the interest in your return.
RD interest is taxable income, whether or not TDS is deducted
The Income Tax Department generally classifies interest on bank deposits under Income from Other Sources. An RD does not become tax-free because the bank pays interest at maturity, because the instalments are small, or because no tax was withheld. You must include the taxable interest for the relevant financial year in your total income and calculate your final liability under the tax regime and slab rates that apply to you.
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TDS (tax deducted at source) is a collection mechanism. The payer withholds an amount and deposits it against your tax identity, while your return determines the final amount due. If the bank withholds more than your eventual liability, you claim the excess through your return; if the withholding is less, you pay the balance.
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Outbyte Driver Updater FREEFix the driver behind crashes, sound loss and screen glitchesFind Drivers →Outbyte PC Repair FREEClear out junk files and repair common Windows errorsFree Scan →Section 194A covers bank time deposits. The Income Tax Department’s 2026 tutorial states: “For the above purposes ‘time deposits’ means deposits including recurring deposits repayable on the expiry of fixed periods.” That definition is why an RD falls within the bank time-deposit TDS rules.
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Current TDS thresholds for RD and other time-deposit interest
For interest credited or paid on or after 1 April 2025, the department gives these annual thresholds for bank, banking-cooperative and post-office time deposits:
| Payee and payer | Annual aggregate interest threshold | What happens after the threshold is crossed |
|---|---|---|
| Resident individual who is not a senior citizen; bank, banking co-operative or post office | ₹50,000 | TDS applies at the applicable rate to the full interest amount, not only the portion above ₹50,000. |
| Resident senior citizen; bank, banking co-operative or post office | ₹1,00,000 | TDS applies at the applicable rate to the full interest amount, not only the portion above ₹1,00,000. |
These are annual aggregate limits. They are a trigger for withholding, not an exemption from income tax. If your interest remains below the applicable ceiling, you may see no TDS while still owing tax on the interest in your return.
The figures above apply to the post-1 April 2025 period. Earlier financial years used different limits in some guidance, so do not use the old ₹40,000/₹50,000 figures for the current period without labeling the earlier year to which they belonged.
Does the ₹50,000 limit apply to each RD?
No. Treating every RD as a separate ₹50,000 allowance can produce an incorrect result. The bank looks at the interest covered by the threshold for the relevant payer and period. Where a bank or cooperative operates core banking solutions, the Income Tax Department says the ceiling is computed across that institution rather than independently for each branch.
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What to include in your bank calculation
- Interest from each RD you hold with the institution.
- Interest from fixed or other time deposits with the same institution when it falls under the same bank-deposit TDS rule.
- Accounts held at different branches of a core-banking bank or cooperative, because the institution-wide calculation applies.
Interest paid by different institutions is not combined into one universal bank total for a single payer’s withholding decision. You should still combine all taxable interest when preparing your own income-tax return, even if no individual payer crossed its TDS trigger.
Illustrative calculation
Suppose a non-senior resident has three RDs with one core-banking bank. The annual interest amounts are ₹22,000, ₹18,000 and ₹15,000. The aggregate is ₹55,000, so the bank’s threshold is crossed and TDS is calculated on the full ₹55,000. At the standard 10% rate, the illustrative withholding would be ₹5,500, subject to the PAN and other rules described below.
When does the bank deduct TDS if the RD matures later?
Section 194A uses the earlier of credit of interest to your account or payment as the withholding point. The maturity date is therefore not automatically the TDS date.
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Interest credited before maturity
If the bank credits interest to your account periodically or otherwise records a credit to your account before the RD’s final maturity payment, that earlier credit can trigger TDS once the applicable annual threshold is exceeded. A later maturity date does not postpone a withholding obligation that arose on an earlier credit.
Interest first paid at maturity
If the bank does not credit the interest until the RD matures and pays it then, the payment date is the relevant event. The bank must still assess the interest that falls within the applicable financial-year and institution-level calculation.
What you should check
- Ask the bank for the dates on which RD interest was credited, not only the contractual maturity date.
- Match those credits to the financial year in which they occurred.
- Compare the institution’s aggregate interest with the threshold for your status.
- Reconcile any TDS entry with the tax credit statement before filing your return.
What TDS rate applies, and why PAN matters
The standard section 194A TDS rate is 10%. This is a withholding rate, not your final tax rate. Your ultimate liability can be lower, higher or nil depending on your total income, deductions or exemptions available under the chosen regime, and your taxpayer status.
If you do not furnish a valid PAN, the payer must use the higher of the statutory rate, the rate in force or 20%; for ordinary section 194A interest, the department’s tutorial explains this as 20%. A missing or invalid PAN can therefore double the usual withholding rate in the same example, even though the underlying interest has not changed.
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- Provide the correct PAN to the bank before it processes the interest credit or payment.
- Check that the name and other account details match the PAN record.
- After filing, compare the TDS shown by the bank with your tax credit statement.
- Claim credit in your return for TDS that is actually reported against you; resolve mismatches with the bank rather than claiming an unsupported amount.
Can you submit Form 15G or Form 15H?
A resident individual may submit Form 15G when below the applicable senior-citizen category, or Form 15H as a resident senior citizen, if the declaration conditions are satisfied. The Income Tax Department’s tutorial states that your estimated tax payable for the year must be nil; Form 15H has additional eligibility treatment for senior citizens.
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What a valid declaration does
If the form is valid and accepted, it tells the payer not to collect TDS on the covered interest. It does not make the RD interest exempt. You must still include the interest in your return and pay any tax that becomes due under your overall income calculation.
Before submitting a form
- Confirm that you are a resident individual for the relevant year.
- Use Form 15G only if you fall below the senior-citizen category; use Form 15H only when the senior-citizen conditions apply.
- Estimate your total income and tax for the entire year, not just the RD interest.
- Do not submit a declaration if the estimated tax payable is not nil.
- Submit the form to each payer that needs it; a declaration given to one bank does not automatically cover another institution.
How to report RD interest in your income-tax return
Report RD interest with your other bank-deposit interest under Income from Other Sources for the relevant financial year. Include the income in total income even when TDS was not deducted or a Form 15G/15H declaration prevented withholding.
- Collect the bank’s interest statement or account records for all RDs and other deposits.
- Identify the interest belonging to the financial year for which you are filing.
- Enter the gross interest under the return section for Income from Other Sources.
- Check the tax credit statement for TDS reported by each payer.
- Claim only the TDS that appears as credit against your tax identity and reconcile any difference with the bank.
- Use the return’s final computation to determine whether you owe additional tax or are due a refund.
Do not enter 10% as your final tax rate merely because the bank withheld at that rate. The return calculation depends on your complete income, taxpayer status and chosen tax regime.
Resident, senior-citizen and non-resident cases compared
| Situation | TDS question | Tax-return treatment |
|---|---|---|
| Resident non-senior individual, interest below the applicable bank threshold | Bank generally does not deduct section 194A TDS on that payer’s covered interest. | Interest remains taxable and must be reported under Income from Other Sources. |
| Resident non-senior individual, aggregate interest above the threshold | TDS applies to the full covered interest amount at the applicable rate. | Report the gross interest and claim the TDS credit shown in the tax credit statement. |
| Resident senior citizen, aggregate interest at or below the senior-citizen threshold | No section 194A TDS is generally triggered by that payer’s covered interest. | Interest is still included in taxable income. |
| Resident senior citizen, aggregate interest above the senior-citizen threshold | TDS applies to the full covered interest amount at the applicable rate. | Report the income and reconcile the withholding credit. |
| Resident individual with a valid Form 15G or 15H | A valid declaration can stop TDS collection when all conditions are met. | The interest remains taxable and must be reported. |
| Non-resident RD holder | The department’s tutorial describes section 194A as applying to interest paid to residents and points to section 195 for payments to non-residents. | Determine residential status, the applicable withholding provision and any treaty position separately; do not apply the resident thresholds automatically. |
Worked cases that commonly cause confusion
Several RDs remain below the limit individually
You hold four RDs with one bank, each producing ₹14,000 of annual interest. None crosses ₹50,000 alone, but the institution-level total is ₹56,000. The bank’s aggregate test is crossed, so withholding is considered on the full covered interest, subject to your PAN and any valid declaration.
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A senior citizen earns ₹90,000 of interest
The amount is below the senior-citizen threshold for the post-1 April 2025 period, so the bank would generally not trigger section 194A TDS on that covered interest. The ₹90,000 is nevertheless taxable income and must be reported.
TDS is withheld, but final tax is lower
A bank withholds 10% on covered interest. When you combine that interest with your other income, your final liability is lower than the amount withheld. You claim the eligible excess as a refund through the return; the withholding itself does not settle the final computation.
No TDS appears on the statement
No deduction may simply mean the payer’s threshold was not crossed, a valid declaration was accepted, or the interest was not yet credited or paid. It is not evidence that the RD interest is exempt. Include the interest in your return after checking the relevant financial-year records.
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Common mistakes and how to fix them
- Assuming no TDS means no tax: report the interest even when withholding is zero.
- Applying the threshold to one RD: total the covered interest for the payer, including institution-wide aggregation where core banking applies.
- Using the maturity date automatically: check whether interest was credited earlier, because the earlier credit or payment date controls.
- Using outdated limits: identify the financial year and apply the post-1 April 2025 figures only to interest credited or paid from that date.
- Calling 10% the final rate: treat it as TDS and complete the full return calculation.
- Submitting the wrong declaration: use Form 15G or 15H only when the residency, age category and nil-estimated-tax conditions fit.
- Ignoring PAN: a missing PAN can lead to 20% withholding under the department’s explanation.
- Applying resident rules to a non-resident: obtain a residential-status and treaty analysis because section 195 may be relevant.
A practical year-end checklist
- List every RD and other time deposit held with each bank, banking co-operative and post office.
- Obtain the interest credited or paid during the financial year, including credits made before maturity.
- Determine whether you are a resident senior citizen, another resident individual, or non-resident for the relevant year.
- For resident bank-deposit cases, compare each payer’s aggregate with the applicable threshold for interest credited or paid from 1 April 2025 onward.
- Confirm that your PAN is recorded correctly.
- If considering Form 15G or 15H, calculate estimated tax for the whole year and submit only when the declaration conditions are met.
- Report gross RD interest under Income from Other Sources.
- Reconcile TDS with the tax credit statement and claim the credit in your return.
- Pay any remaining tax or claim a refund based on the return’s final computation.
What to remember about future changes
Thresholds, rates and declaration rules can change through later Finance Acts or updated departmental guidance. Keep the financial year visible on your records, and verify the current Income Tax Department instructions before filing. For the period covered here, the decisive points are the post-1 April 2025 thresholds, institution-level aggregation where core banking applies, the earlier-of-credit-or-payment timing rule, and the separation between taxable RD interest and TDS withholding.
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