From a young age, our parents encouraged us to save. They would get you a fancy piggy bank and ask you to chip in regularly. They would ask you to save a reasonable sum you received on your birthday and other occasions from well-wishers. After a brief span, you could use the piggybank money to buy your favourite toys. As you grow old, the piggy bank gets replaced with financial instruments. They encourage you to save and fulfil various goals.
Today, there are different financial instruments you can consider. The Recurring Deposit or an RD is a financial instrument you can opt for. It works like a piggy bank. You can contribute to the RD Account regularly and build your corpus with time. Besides encouraging you to save, RD also lets you save by offering a competitive interest rate.
You can open an RD Account with any leading bank, non-banking financial institution, or post office, offline or online. You only need to complete a simple account opening process and submit necessary documents. Anyone can open an RD Account, minors, adults, senior citizens, and partnership companies.
RD interest rates and tax policies
You need to pay taxes on RD interest earnings. These get added to your taxable income. You get taxed according to the tax slab rate you classify under. Given this, the taxation of every RD Account holder differs. If you want to determine RD interest earnings, the RD calculator is an online tool you can rely on. It offers accurate results about your RD investment returns within minutes.
It offers a clear breakdown of the interest earnings. This helps you understand its earning potential. You can add the interest earnings to your taxable income and determine the taxation you will draw. Note that taxation differs based on whether you have linked your PAN card for your Income Tax Return filing. If you have linked your PAN Card, you need not worry.
You get taxed at the standard rate. If you have not linked your PAN Card, you get taxed at a different, higher tax rate as penalty. You can readily access the RD calculator on a Banking App. Use the tool any number of times, free of charge.
Taxation on post office RD of five years
As mentioned, you can open an RD with a bank, NBFC, or post office. Opening an RD Account with a post office is beneficial. If held for five years, you can claim a tax benefit on it. The post office Recurring Deposit Account is classified under Section 80C of the Tax Act, 1961. You can avail of tax benefits up to Rs. 1.5 lakh on your RD Investment.
