Tds on RD & fixed deposit

Extracts from S.194A

(from 1.6.15)

Provided further that the amount referred to in the first proviso shall be computed with reference to the income credited or paid by the banking company or the co-operative society or the public company, as the case may be, where such banking company or the co-operative society or the public company has adopted core banking solutions.

"Currently, provisions of proviso to section 194A(3)(i) of the Act provide that the interest income for the purpose of deduction of tax by the banking company or the co-operative bank or the public company shall be computed with reference to a branch of these entities.

As currently, most of these entities are computerised and follow core banking solutions for crediting interest, there is no rationale for continuing branch wise calculation of interest by the entities who have adopted core banking solutions.

It is, therefore, proposed to amend the provisions of section 194A of the Act to provide that the computation of interest income for the purposes of deduction of tax under section 194A of the Act should be made with reference to the income credited or paid by the banking company or the co-operative bank or the public company which has adopted core banking solutions."

Be it in separate schemes, but both RD and FD are term deposits and earn taxable income as interest. If they have been opened at a single bank, albeit different branches, the bank still proves to be the entity that provides the depositor the collective interest.

So, yes, as per Section 194A, the interest thus earned will be taxable.

Here you can get more infornation about TDS on FD.