Recurring deposit eligible u/s 80c

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This query is : Resolved

Jagadish T G (Querist)

13 August 2015 Dear Professionals,

I have deposited Rs.30,000 (Rs.5000 x 6 Months) into ICICI Bank & RD matured & withdrawn in the same FY.

Now my query is can i claim ded. u/s 80C.?

Please advise.

Thanks in advance.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

13 August 2015 Only tax saving fixed deposit made for 5 years is eligible for deduction u/s 80C.

CA Ayush Agarwal

CA Ayush Agarwal (Expert)

13 August 2015 Deduction is available for a term deposit for five years in a scheduled bank. There is no
statutory definition to indicate the meaning of "term deposits". The RBI's master
circulars define it thus: "Term deposit means a deposit received by the bank for a fixed
period and which is withdrawable only after the expiry of the said fixed period and
shall also include deposits such as Recurring/Cumulative/Annuity/Reinvestment
Deposits/Cash certificates and so on."
Since the incometax law does not have a definition, the RBI's can be safely taken as
correct. Section 194A Explanation 1 has a definition of the term "time deposits" to
mean deposits repayable on the expiry of fixed period and excludes recurring deposits.
This definition is given for the specific purpose of Tax Deducted at Source on interest
income.
In view of the above, it seems that Recurring Deposit should be elegible for deduction
under Section 80C. However, the intent of law does not appear to make it an
allowable investment. The loophole needs to be plugged by issuing clarification on the
matter.

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