Recurring Deposit Tax Exemption 80C

Think of recurring deposits as your steady savings habit, and maybe you’re curious if those monthly investments can lower your tax bill under Section 80C.

What Exactly is a Recurring Deposit (RD)?

An RD is like a monthly saving commitment where you deposit the same amount with the bank or post office, and they add interest on top. It’s a reliable and stress-free way to build your savings gradually.

Can You Claim Tax Benefit Under Section 80C on RD?

Simply put, regular recurring deposits at banks don’t give you tax deductions under Section 80C. What you save there won’t reduce how much income tax you pay.

And the interest you earn on that money? That’s taxable too, just like your salary or any other income.

But Wait, There’s a Catch with Post Office RD!

If you open a 5-year Post Office Recurring Deposit, the amount you invest is eligible for tax deduction under Section 80C—up to ₹1.5 lakh a year. This means you can save some tax by putting money here.

Just remember: the interest you earn from this post office RD is taxable when it’s credited, so you still pay tax on that part.

What About Tax Deducted at Source (TDS)?

When you earn interest on RDs, the bank usually deducts TDS at 10% (if you provide your PAN card). If you don’t provide it, they deduct 20%.

But here’s a handy tip: if your total income is below the taxable limit, you can fill out Form 15G (or Form 15H if you’re a senior citizen), which tells the bank not to deduct TDS.

Why Consider Post Office RD?

• It’s backed by the government, so very safe.
• You get a tax deduction on the amount you invest (a nice bonus!).
• Good for people who want small, steady savings with some tax relief.

What Else Can You Invest in to Save Tax Under 80C?

If tax savings are your main aim, there are better options out there that can also give good returns:

• Public Provident Fund (PPF)
• Employee Provident Fund (EPF)
• Equity Linked Savings Scheme (ELSS)
• National Savings Certificate (NSC)
• Tax-saving Fixed Deposits (5-year FD)
• National Pension System (NPS)

These let you save tax and might grow your money faster than a regular RD.

Conclusion 

Consistent saving with recurring deposits is a good habit, but only the 5-year Post Office RD offers tax relief under Section 80C. If you want to save on taxes and grow your money better, explore other investment routes that qualify under 80C.