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After taxing fixed deposits, the tax authorities are now looking at recurring deposits, popular among small savers, to boost revenue collections.
From June 1, interest income of ₹10,000 or more in a financial year from recurring deposits will be subjected to TDS (tax deducted at source), as is the case with fixed deposits. The TDS rate will be 10 per cent, if the bank has the PAN details of the depositor, otherwise the deduction rate will be 20 per cent.
Direct tax target TDS from various payments contributed around 35 per cent to total direct tax collections during 2014-15, which is expected to increase to around 40 per cent during the current fiscal year. The Finance Ministry has set a collection target of ₹7.98 lakh crore from direct taxes during the current fiscal year, which requires 14.6 per cent growth.
Although unlike fixed deposits (which require saving the entire amount at one go), recurring deposits involve saving in equated instalments, interest earned is the same for both. This has made recurring deposits popular among small savers.
A senior tax department official said that an amendment to the Income Tax Act in this year’s Budget includes recurring deposit in term deposits. Considering their popularity, there are plans to go ‘big’ on these, the official said.
No escape Since, the Budget has also changed the process of calculating interest from a branch basis to a bank basis, one cannot escape TDS if a recurring deposit is in one branch and a fixed deposit is in another and interest on each, when calculated separately, is less than ₹10,000, but taken together is more than the threshold, the official added.
Tax authorities also plan to make the process easy for submission of Form 15H/15G. These forms help one to get the interest without TDS. These are filed by persons who do not have taxable income and also do not get ₹2.5 lakh or more as interest income during a fiscal year. At present, these forms are submitted physically, but now the plan is to make it online, optional for the time being.
“It would be a win-win situation for all. As filing of these forms is an annual exercise, the customer would gain in terms of time, money and effort as forms can be filed online. Similarly, banks would also benefit on account of savings of time, cost and space,” the official said.
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