FD (Fixed Deposit) and RD (Recurring Deposit) are two of the most popular and oldest methods of saving funds. You just need to spare out some money for them and get a high-interest return on it. However, the interest income you receive through them is counted as regular income, and you need to pay tax on it. In case the amount you earn is less than 40,000, there will be no tax.
When the earned interest on your RD is more than 40,000, you will have to pay 10% TDS on it. A few ways to save on TDS for your RD returns are:
● NIL Income: RD returns aren't taxed if the taxable income of the holder is NIL. You can take advantage of this if any of your family members has NIL taxable income or no income at all. You can start the RD with their name to avoid any TDS.
● Form 15G: In case your own income is below the tax slab, you can submit Form 15G to get back the TDS you paid on your RD returns. You will have to go with Form 15H if your age is above 60.
● Different RDs: If you don't let your RD returns get above the limit of ₹40,000 in a single bank, you won't have to pay any TDS on it. However, you will still have to add the total return amount to your regular income.
If you plan on moving to FD, then you should know that the rules are almost the same for it. Plus, you will have to accumulate a lump sum amount, and FD interest rates aren't higher than RD interest rates. So you don't get any benefit from it.
