RD tax, TDS and DICGC: a 2026 guide
Understand the difference between taxable RD interest, the TDS threshold and the ₹5 lakh DICGC insurance ceiling.
Three ideas are often mixed together when people discuss recurring deposits: taxable interest, tax deducted at source (TDS), and deposit insurance. They are separate rules.
RD interest is generally taxable
Interest from a recurring deposit is generally reported as income from other sources. Your tax liability depends on your total taxable income and applicable rules—not only on whether the bank deducted TDS.
TDS is not the same as final tax
Under Section 194A, the current bank-deposit interest threshold is ₹50,000 for a non-senior depositor and ₹1,00,000 for a senior citizen. Recurring deposits are included in the definition of time deposits.
Crossing the threshold concerns the payer’s TDS obligation. It does not mean only the amount above the threshold is taxable, and staying below it does not automatically make the interest tax-free. Refer to the Income Tax Department’s Section 194A text or a tax professional for your circumstances.
DICGC has a ₹5 lakh ceiling
DICGC insurance covers eligible deposits—including savings, fixed and recurring deposits—with an insured bank up to ₹5 lakh per depositor per bank in the same right and capacity. Principal and accrued interest are aggregated for the ceiling.
If you hold multiple eligible accounts with the same bank in the same capacity, they are not each separately insured up to ₹5 lakh. Read the official DICGC deposit insurance guide.
A useful review checklist
- Confirm that the bank is insured by DICGC.
- Add eligible deposits held with that bank in the same capacity.
- Keep interest certificates and review Form 26AS/AIS where applicable.
- Recheck current thresholds before acting; tax rules can change.
This article is general educational information, not personalised tax advice.