The Finance Bill, 2015 has proposed to amend section 194-A of Income Tax Act, 1961 so as to levy TDS on recurring deposits as well. It is notable here that earlier TDS was applicable only on the interest earned in Fixed Deposits with the banks. Now interest earned from Recurring deposits will also be subject to TDS.
The relevant amendment made in section 194A are as follows:
(i) The current exemption fromTDS on payments of interest to members by a co-operative society will be withdrawn in respect payment of interest by co-operative banks to its members.
(ii) The definition of 'time deposits' currently excludes recurring deposits from its scope. It is proposed to amend the definition of "time deposit" so as to include recurring deposits within its scope.
(iii) The deduction of tax under this section from interest payments on the compensation amount awarded by the Motor Accident Claim Tribunal shall be made only at the time of payment, if the amount of such payment or aggregate amount of such payments during a financial year exceeds INR 50,000.
The above amendments will however come into effect from 01.06.2015.
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what about the RD's to be opened in april/May 2015? will the also attract TDS as the proposal is to be implemented wef 1/6/15 or RD's already opened by people before budget 2015.