Tax on Recurring Deposit Interest Rates 2026

Interest earned on a Recurring Deposit is fully taxable and added to your total income. It is taxed as per applicable income tax slab rates, such as 5%, 20%, or 30% (plus cess and surcharge, if applicable). The tax amount depends on your total annual income and tax bracket. 

For the financial year 2025-26 (Assessment Year 2026-27), the new tax regime specifies the following income tax slabs: 

What are the Tax Exemptions on RD Interest? 

TDS on RD interest is deducted only if total interest from all RD accounts with a bank exceeds Rs.40,000 in a financial year (Rs.50,000 for senior citizens). 

1. The threshold applies to cumulative RD interest, not to each individual RD account. 

1. If total RD interest remains below the applicable limit, no TDS is deducted. 

1. If their total income is below the taxable limit, individuals below 60 years and senior citizens can submit Form 15G and Form 15H, respectively, to avoid TDS. 

1. These forms declare that the individual’s income does not exceed the basic exemption limit. 

1. A refund can be claimed by filing an income tax return if TDS is deducted despite income being below the taxable limit. 

How to Declare Interest Earned on RD in ITR (Income Tax Return)? 

To declare interest earned on RD in ITR, follow the instructions mentioned below: 

1. Report the interest earned from all Recurring Deposits along with the TDS deducted while filing the income tax return. 

1. To get details of RD interest and TDS, use Form 16A provided by the bank. 

1. Enter these details in the appropriate ITR form and claim TDS as a tax credit. 

1. Verify whether the TDS on RD interest is correctly reflected in Form 26AS, the annual tax credit statement. 

1. Form 26AS can be downloaded from the Income Tax Department’s website for cross-verification. 

How to Calculate TDS on RD? 

To calculate the total interest earned from all Recurring Deposit accounts during the financial year, follow the steps mentioned below: 

1. Check whether the interest exceeds Rs.40,000 (Rs.50,000 for senior citizens). 

1. Apply to the applicable TDS rate—10% with PAN or 20% without PAN, if the threshold limit for tax-free interest is crossed. 

1. The calculated amount is the TDS deducted by the bank. 

Example: If a general investor earns Rs.5,000 as RD interest in a year, it is below Rs.40,000, so no TDS is deducted. If the amount is Rs.65,000 and the investor is a general public with a PAN card, then the TDS amount will be Rs.6,500. 

How to Minimize TDS on RD interest? 

To minimise or avoid TDS on RD interest, follow the below-mentioned steps: 

1. If total income is below the taxable limit, submit Form 15G (non-senior citizens) or Form 15H (senior citizens) to avoid TDS. 

1. To reduce or minimse the taxable income, consider opening an RD in the name of a family member (parents, spouse, or minor) with low or nil taxable income. 

1. No TDS is deducted if interest earned on a single RD is Rs.10,000 or less in a financial year. 

1. If excess TDS is deducted, you can claim a refund by filing your income tax return. 

1. Obtain Form 16A from the bank to verify the details of TDS deducted on RD and avoid mismatches while filing your ITR. 

Tax on Indian Post Office Recurring Deposit (RD)

A post office savings program supported by the government is called Post Office Recurring Deposit (PORD). Up to a duration of 60 months, investors can make monthly small-amount investments. Under Section 80C of the Income Tax Act of 1961, investments in Post Office RDs are not eligible for a tax exemption. The depositor, however, must pay taxes on the interest income. It is taxable at the investor's applicable income tax rate. 

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