Is RD interest taxable in India?

Yes. Recurring deposit interest is generally taxed as income at your marginal slab rate, similar to FD interest.

When is TDS deducted on RD?

Banks may deduct TDS when total interest from deposits crosses prescribed thresholds in a financial year. Verify current limits — they differ for seniors vs non-seniors.

What is the real yield on a 7% RD?

After 30% tax, 7% becomes roughly 4.9%. Subtract inflation for real purchasing power — often near zero or negative for conservative RD rates.

Guide · India · Recurring deposits

RD Interest, TDS & Real Yield After Tax in India

Your bank quotes a nominal RD rate — but recurring deposit interest is fully taxable at your income slab. TDS is only withholding. Here is how to calculate your true post-tax RD yield and real return after inflation.

Model post-tax yield: RD calculator — compare with FD calculator for lump-sum behaviour — FD real return guide

Disclaimer: TDS thresholds and senior-citizen rules change in Finance Acts. Confirm current limits on official sources. Not tax advice.

Piggy bank and coins symbolizing monthly recurring deposit savings habit — Photo: Unsplash (licensed for editorial use)

Quick answer: RD quoted rate vs what you keep

RD interest = income taxed at your slab. A 7% RD in the 30% bracket yields ~4.8% after tax. After 6% inflation, real return may be negative. Use the RD calculator for your instalment, tenure, and slab.

RD interest is "Income from Other Sources"

Unlike PPF or SSY, typical bank RD interest is added to total income and taxed at your marginal slab. The brochure rate is never what high-slab taxpayers keep.

TDS vs total tax liability

Banks deduct TDS when interest from deposits (FD + RD combined, per PAN) crosses thresholds — commonly ₹40,000 for non-seniors and ₹50,000 for senior citizens per financial year (verify current law).

Situation	What happens
TDS < actual tax owed	Pay balance when filing ITR
TDS > actual tax owed	Claim refund in ITR
Below exemption limit	File 15G/15H if eligible to reduce TDS

Remember: TDS credits appear in Form 26AS/AIS — reconcile before filing.

Inflation still applies after tax

After tax, ask whether remaining return beats inflation relevant to your goals. RDs excel at discipline and capital safety — not necessarily real wealth creation in high-inflation periods.

Person depositing monthly savings at a bank for recurring deposit — Photo: Unsplash (licensed for editorial use)

Real-world example: ₹5,000/month RD for 3 years at 7%

Maturity roughly ₹1.95 lakh; interest — ₹15,000. In the 30% slab, tax — ₹4,680 — net interest — ₹10,320. Effective yield well below 7%. Missed instalments attract penalties — factor that into planning.

RD vs FD vs SIP — when each fits

RD: Monthly discipline, short-medium goals, known maturity.
FD: Lump-sum parking; same tax treatment as RD.
SIP: Long goals with volatility tolerance — see SIP CAGR guide.

Best practices

Size RD so you can complete all instalments — penalties hurt compounding.
Aggregate FD+RD interest when estimating TDS and ITR liability.
Compare post-tax RD yield to PPF/ELSS for long horizons.

Common mistakes

Assuming TDS = final tax.
Ignoring missed-instalment penalties in yield math.
Using RD for 10+ year wealth goals without inflation check.

Frequently asked questions

Is RD interest taxable?
Yes, at your income slab.
When is TDS deducted on RD?
When total deposit interest crosses prescribed annual thresholds per PAN.
What is real yield on 7% RD?
~4.8% after 30% tax; lower after inflation.