The short version
- RD interest is added to your income and taxed at your slab rate.
- It is taxable every year as it accrues, not only at maturity.
- Banks deduct 10% TDS when the interest you earn from them in a financial year passes ₹50,000 (₹1,00,000 if you are 60 or older). Without a PAN, TDS is 20%.
- TDS is not an extra tax — you claim it against your final tax in the return.
Example: ₹25,000 a month at 7% for 5 years
Maturity value about ₹17,98,320. The interest grows each year as the balance builds:
| Year | Interest that year |
|---|---|
| Year 1 | ₹11,553 |
| Year 2 | ₹33,941 |
| Year 3 | ₹57,938 |
| Year 4 | ₹83,659 |
| Year 5 | ₹1,11,228 |
From year 3 the yearly interest passes ₹50,000, so a bank would deduct TDS for a non-senior. A senior citizen would cross the ₹1 lakh limit only in the final year.
Form 15G and 15H
If your total income is below the taxable limit, you can submit Form 15G (under 60) or Form 15H (60 and over) to the bank at the start of each financial year, and it will not deduct TDS. Under the new regime the 87A rebate makes income up to ₹12 lakh tax-free, but 15G is only allowed if your income is below the basic exemption, so check carefully; 15H is allowed whenever your final tax is nil.
Reporting it
Report the interest under “Income from other sources” in your return. Your AIS and Form 26AS show both the interest and any TDS. If the bank deducted more than your actual tax, you get it back as a refund.
Post Office RD
Interest on a Post Office RD is also taxable and shows in your AIS. Report it the same way even if no TDS appears.
Smart ways to reduce the tax
There is no special deduction for RD interest. Senior citizens in the old regime can claim up to ₹50,000 of deposit interest under section 80TTB; in the new regime that deduction is not available. Spreading deposits across family members who pay less tax — for example a parent with low income — legitimately lowers the total tax, as long as the money really belongs to them (clubbing rules apply to gifts to a spouse).
If you are a salaried employee, the bank’s 10% TDS may be less than your actual tax at 20% or 30%; the balance is due through advance tax or at filing time, so keep an eye on your AIS during the year. If TDS was deducted but you owe nothing, claim the refund in your return.
Key RD figures (checked 5 November 2026)
| Item | Figure |
|---|---|
| Post Office 5-year RD rate (Oct–Dec 2026) | 6.7%, compounded quarterly |
| Minimum deposit | ₹100 a month (Post Office) |
| TDS threshold per bank | ₹50,000 interest a year (₹1,00,000 seniors) |
| TDS rate | 10% with PAN, 20% without |
| Compounding formula | Σ P × (1 + r/400)^(k/3) |
FAQ
Is RD interest taxable?
Yes. It is added to your income and taxed at your slab rate every year as it accrues.
What is the TDS limit on RD interest?
₹50,000 a year per bank, or ₹1,00,000 for senior citizens. TDS is 10% (20% without PAN).
What does ₹25,000 a month at 7% for 5 years give?
About ₹17,98,320 at maturity.
Sources (checked 5 November 2026): Ministry of Finance (Department of Economic Affairs) small savings rates for Q3 FY 2026-27, announced 30 September 2026 (5-year RD 6.7%, reported by Studycafe and Free Press Journal); India Post Recurring Deposit Account rules (quarterly compounding, default fee, loan and premature closure); Income-tax Act TDS thresholds for interest (₹50,000 / ₹1,00,000 for senior citizens from 1 April 2025).