Tax on Recurring Deposit Rules and Rates in 2025

Tax on Recurring Deposits (RD) is a crucial piece of information that investors should be aware of. This is because the returns made on your RD are fully taxable according to the Income Tax Act (Section 80C). This can reduce your net returns, especially if you fall under a high-income bracket. 

Hence, gaining an understanding of tax implications of RD is necessary. Read to know all about the updated Income Tax regime and how it affects your RD earnings.

How is Tax or TDS Imposed on Recurring Deposit?

Any interest generated from the sum amount deposited in an RD every year is any investor's annual income. It is fully taxable as ‘income from other sources’. The RD tax rate is the same as the income tax tab slab of the depositor. 

TDS (tax deducted at source) is deducted from interest income if it is more than ₹40,000 in a financial year for general depositors and ₹50,000 for senior citizens. The 10% rate applies if you have submitted your PAN card; otherwise, the TDS rate is 20%. 

Download the Stable Money app today to get interest rates up to 9.5% on FDs and invest in tax-saver FDs. 

Overview of Changes Made in the New Regime of RD (2025)

Here is an overview of the changes made to RD, according to the new regime of income tax on recurring deposit 2025:

How to Calculate Tax Deduction at Source on RD?

Here are a few examples to explain how a calculation of TDS on RD interest: 

• Regular Individuals Who Have Submitted PAN Card

If a person earns ₹52,000 interest on their RD amount, then the TDS on their RD is 10% of the total exceeded interest amount. This means that 10% of ₹12,000, i.e., ₹2,000 deduction, is done in this instance. 

• Regular Individuals Who Have Not Submitted Their PAN

If a person earns ₹52,000 interest on their RD amount, the TDS that will get deducted from their RD is 20% of the total amount of interest. This means that the income tax on RD will be 20% of ₹12,000, i.e., ₹4,000.

The TDS deducted is higher for individuals who have not submitted their PAN card under Section 206 AB.

Stable Money has an RD calculator, which can help you gauge the returns you can make on your RD investment!

Strategies For Minimising Tax Liabilities on RDs

According to the Income Tax Act, earned interests on Recurring Deposits are not exempted from tax. Hence, you can implement these strategies to minimise your imposed tax on recurring deposits:

• Invest in Tax Saver Schemes

You can consider investing in 5-year tax-saving term deposit schemes along with your RDs. By investing in such schemes, you can stay under the threshold of tax deduction and save on your overall tax liability. 

• Split Your Recurring Deposit

This is another way of reducing tax. You can consider splitting RDs amongst your family members. If each of the members in your family has an RD interest below ₹40,000, then they would not need to face Tax Deduction at Source.

Application of Tax on Recurring Deposit and Earned Interest

As you can tell already there are no major implications of the updated tax regime of 2025 on Recurring Deposits. This is because RD accounts of any kind are not exempt from TDS. 

Did you know that there is another type of term deposit investment that you can do and which would give you tax benefits as well? Well, they are FDs or Fixed Deposits. 

You can consider applying for a tax-saver FD with Stable Money to get interest up to 9.5% and without requiring a bank account as well. Furthermore, we also have active customer service 24/7 where you can reach out, to get your queries solved. So hurry up and reach out to Stable Money today to get banking facilities without hassle.