Post office recurring deposit.

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Rajesh2345 (Querist)
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28 September 2012 dear experts
i have following querry.

I am planning to open Post office recurring deposit ( 5 years) in the name of my kid ( minor).
on maturity, is the interest is exempt from income tax ?

Jagga Rao Malipeddi

Jagga Rao Malipeddi (Expert)
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29 September 2012 Banks/Post Offices don’t deduct tax at source on RDs but the interest itself is taxable like other interest income. It will be added to the rest of your income and taxed at your slab. The interest income from the deposit will be chargeable on cash basis or on mercantile basis. This interest will be chargeable under the head income from other sources on one of these methods which is the method of accounting regularly employed by the assessee. If the cash system of accounting is followed, the entire income by way of interest will be chargeable only at the time when the interest is received. f on the other hand the mercantile system of accounting is followed, the interest will have to be accounted in the respective years and the years in which you kid is a minor, the interest income will have to be clubbed in the hands of the parent and the interest relating to the period after the kid attained majority will be taxed in her/his hands.

Jagga Rao Malipeddi

Jagga Rao Malipeddi (Expert)
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