TDS on RD Interest: Is RD Taxable & How Much Tax Will You Pay? 

This guide answers whether recurring deposit interest is taxable, explains how RD interest is taxed under your income slab, when TDS applies and at what rate, and how RD tax treatment compares with fixed deposits. Read time: about 6 minutes. 

Is RD interest taxable? Yes. The interest you earn on a Recurring Deposit (RD) is fully taxable and must be added to your total income for the year, just like interest from a Fixed Deposit (FD). 

Many individuals prefer Recurring Deposits as they seek reliable and regular returns on their savings every month. Fixed income gives the same returns every time, which makes it a popular investment for people from all kinds of professions. However, while RDs help grow your money over time, it’s equally important to understand the RD tax implications that come with them. 

Here, we explain how taxation works on RD interest, what tax on recurring deposit interest really means, how TDS on RD applies and what exemptions, if any, are available under Indian tax laws. 

What is a Recurring Deposit? 

A Recurring Deposit is a savings instrument offered by banks and post offices where you deposit a fixed amount every month for a chosen tenure, typically ranging from 6 months to 10 years. In return, the bank pays interest at a fixed rate, similar to a Fixed Deposit, but calculated on a smaller, growing balance since deposits are made monthly rather than as a single lump sum. 

At the end of the tenure, you receive the total amount deposited plus the interest earned, usually compounded quarterly. RDs are popular with salaried individuals because they encourage disciplined monthly saving without requiring a large upfront amount. 

Is Recurring Deposit Taxable? 

The answer is yes. Recurring deposit interest is taxed under ‘income from other sources’ and is included in your yearly income. This is in contrast to instruments like the Sukanya Samriddhi Yojana (SSY) and the Public Provident Fund (PPF), which have tax-free interest under their exempt-exempt-exempt (EEE) status and do not attract this tax. 

This means that, based on how you calculate it, the interest from your RD adds up every year and is fully taxable when it is credited or when it becomes due, regardless of whether you have withdrawn it. 

Is RD Interest Taxable Every Year or Only at Maturity? 

This is one of the most common points of confusion. Even though you receive your RD proceeds as a lump sum at maturity, the interest is taxed on an accrual basis, meaning it is taxed in the year it is earned, not just in the year the RD matures. 

• Banks typically credit or compound RD interest quarterly, and this accrued interest counts as income for that financial year 

• You are required to report the interest accrued each year under ‘income from other sources’ in your ITR, even if you have not withdrawn any money 

• If you skip reporting the yearly accrued interest and only declare it at maturity, it can create a mismatch with your Form 26AS and Annual Information Statement (AIS) 

DID YOU KNOW? 

Some taxpayers choose to declare RD interest only at maturity instead of every year. Both approaches are accepted by the Income Tax Department as long as you are consistent, but reporting it yearly usually matches more cleanly with your Form 26AS and AIS. 

RD Tax Rate: How RD Interest Is Taxed as Per Your Income Slab 

The tax you pay on RD, or RD tax, depends on your total yearly income. The interest you earn is added to your income and taxed based on the tax slab you fall into. 

Here’s an example to simplify it: 

• Let’s say you invest ₹5,000 every month in an RD for one year at an interest rate of 6.5% 

• At the end of the year, you receive around ₹65,000, including interest 

• The interest earned, roughly ₹1,400 to ₹1,600, will be added to your taxable income 

• You will pay 20% tax on the RD interest if your overall income falls in the 20% tax slab 

This makes it important to consider post-tax returns while planning your RD investments. 

RD Tax Rate: Slab-wise Tax on RD Interest 

RD interest does not have a separate tax rate of its own – it simply gets added to your total income and taxed as per the slab you fall into. Here is how the slabs look under the new tax regime, which is the default regime for FY 2025-26: 

Annual Income Slab	Tax Rate (New Regime)
Up to ₹4,00,000	Nil
₹4,00,001 – ₹8,00,000	5%
₹8,00,001 – ₹12,00,000	10%
₹12,00,001 – ₹16,00,000	15%
₹16,00,001 – ₹20,00,000	20%
₹20,00,001 – ₹24,00,000	25%
Above ₹24,00,000	30%

A rebate under Section 87A brings your tax liability to nil under the new regime if your taxable income does not exceed ₹12,00,000. If you opt for the old tax regime instead, the basic exemption limit is ₹2,50,000, rising to ₹3,00,000 for senior citizens (60 to 79 years) and ₹5,00,000 for super senior citizens (80 years and above), with income above these limits taxed at 5%, 20% and 30% across the remaining slabs. 

TDS on RD Interest: Threshold, Rate & When It Applies 

It is not known to many people that banks are required to deduct TDS on RD interest once the interest earned crosses a certain threshold. As of FY 2025-26, the threshold and rate depend on whether you have submitted your PAN to the bank: 

When PAN Is Provided 

• TDS applies once your total RD interest with the same bank crosses ₹50,000 in a financial year (₹1,00,000 for senior citizens) 

• The bank deducts TDS at 10% on the interest amount above this threshold 

• This deduction is reported on your Form 26AS and can be claimed as credit while filing your income tax return 

When PAN Is Not Provided 

• The same interest thresholds apply, but the TDS rate rises to 20% instead of 10% 

• Since a higher rate is deducted, it is worth linking your PAN with the bank to avoid losing extra money upfront 

PRO TIP 

TDS on RD is a non-final tax. If your overall income is below the taxable limit, you can claim a refund of the TDS deducted while filing your income tax return. 

Exemption and Declaration Options 

The amount below the applicable TDS threshold is exempt from TDS deduction, and you can also provide the bank with Form 15G or Form 15H at the start of the financial year for this purpose. 

• Form 15G is meant for individuals below 60 years of age, while Form 15H is meant for senior citizens aged 60 and above. Both forms declare that your total income is below the taxable limit, so the bank should not deduct TDS. The declaration must be submitted afresh at the start of every financial year, since it does not automatically carry forward 

As a result, the bank sees that your income is not above the taxable limit, so no money is deducted for taxes. Still, submitting a declaration when it does not genuinely apply to you can lead to penalties, which is why you should check your tax situation first. 

RD vs FD: How Is Tax Treatment Different? 

RD and FD interest are taxed in largely the same way, since both fall under ‘income from other sources’ and both are subject to TDS under the same rules. A few practical differences are worth knowing: 

Aspect	Recurring Deposit (RD)	Fixed Deposit (FD)
How Interest Accrues	On a growing monthly balance, since deposits are made every month	On the full lump sum from day one
TDS Threshold	Same ₹50,000 / ₹1,00,000 threshold, but takes longer to reach since deposits build up gradually	Same threshold, reached faster since the full amount earns interest from the start
Section 80C Benefit	Not available on regular RDs	Available only on 5-year tax-saving FDs, not on regular FDs
Best Suited For	Disciplined monthly saving with smaller amounts	Investing a lump sum you already have

To Sum Up 

Recurring Deposits are a reliable savings option offering steady returns with minimal risk. However, understanding the RD tax implications is crucial to avoid surprises at maturity. Whether it’s knowing when tax on recurring deposit interest applies or how TDS on RD impacts your final returns, staying informed helps you optimise your financial strategy. 

Not sure where to begin? You can also check out our Fixed Deposit option – it’s low-risk and super easy to start. In fact, you can book an FD on the Fibe App starting from just ₹1,000, instantly and hassle-free. 

Book a Fixed Deposit on the Fibe App starting from just ₹1,000 – instant and hassle-free. 

FAQs On RD Interest Taxation 

1.  How much amount of RD interest is tax-free? 

No specific tax-free limit applies to RD interest alone. Your full interest escapes tax only if your annual gross income falls below the basic exemption limit of ₹2,50,000 under the old regime (₹4,00,000 under the new regime) for a person below 60 years. If eligible, you can submit Form 15G or Form 15H so the bank does not deduct TDS. 

2.  Is interest on FD and RD taxable? 

Yes, interest earned on both Recurring Deposits and Fixed Deposits is taxable. This interest, along with other similar interest income, is taxed under ‘income from other sources’ as per the applicable income tax slab rates. 

3.  Is RD interest taxable if I submit Form 15G or 15H? 

The interest itself remains taxable and must still be reported in your ITR. What Form 15G or 15H does is stop the bank from deducting TDS upfront, provided your total income is genuinely below the taxable limit. 

4.  What is the RD tax rate for senior citizens? 

There is no separate RD tax rate for senior citizens – the interest is taxed as per their applicable income slab, same as anyone else. However, senior citizens get a higher TDS threshold of ₹1,00,000 (compared to ₹50,000 for others) and a higher basic exemption limit under the old regime. 

5.  How is TDS on RD interest reflected in Form 26AS? 

Whenever a bank deducts TDS on your RD interest, it reports this to the Income Tax Department, and the deducted amount shows up against your PAN in Form 26AS. You can then claim this as tax already paid while filing your income tax return.