Recurring Deposit is one of the most popular term deposit schemes among Indians. It allows the investors to save certain amount every month and the interest rates in RD are almost equal to FD. These are 6 important FAQ’s on Recurring Deposit premature closure in India

1. How to break the Recurring deposits prematurely?

The same kind of procedure that is followed to break the FDs prematurely is used to break the Recurring deposits before the maturity period. In this situation, the interest shall be paid at the rate that is applicable during the time of the deposit, only for the time for which the concerned deposit has been remained with the bank. The premature breaking of the RD also follows a penal rate of interest as directed by the bank on the very date of the deposit.

2. Does bank charge any penalty on the premature breaking of the recurring deposit?

The penalty of premature breaking of the recurring deposit varies from bank to bank. For e.g., the Canara Bank charges a penalty of 1 percent on the premature breaking of the recurring deposit. The bank immediately breaks your recurring deposit after making the calculation of the concerned interest and the penalty so charged.

3. Do all the banks charge penalty on breaking the recurring deposit before maturity?

There are various banks that do not charge any penalty for the premature breaking of FDs as well as RDs. These banks are IDBI Bank Freedom Deposit, Yes Bank, ING FD+ and Axis Bank in terms of NRE Deposits.

4. What all deductions shall be made in the premature breaking of the Recurring Deposit?

The banks deducts the incentives that it has previously offered on any single deposit along with the penal interest while breaking your recurring deposit prematurely.

5. Would there be any kind of Tax Deduction at Source for recurring deposit?

Yes, in a budget prepared under 2015, an introduction for TDS has been made on the recurring deposit. Amendments have been made to section 194A which says that any income above Rs. 10,000 will absolutely attract Tax deduction at Source in the recurring deposits. But no interest shall be charged for the TDS upto Rs. 10,000 of income.

6. Would multiple number of recurring deposits attract the Tax Deduction Source?

If an individual is a holder of multiple recurring deposits with the same bank, the cumulative interest on the income will attract the TDS. This will happen only if the income exceeds beyond Rs. 10,000.


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