Post Office schemes have always been popular for their secure returns and tax savings, but did you know that not every scheme is completely tax-free? Some schemes also require tax deductions on your interest, known as TDS (Tax Deducted at Source). Under the new rules that came into effect on April 1, 2025, the TDS threshold has changed. Let’s understand in simple Hindi how much tax you may have to pay on each Post Office scheme so that you don’t suffer huge losses.
Key Takeaways
Quick Read- Which Post Office schemes are subject to TDS
- National Savings Recurring Deposit (RD)
- Senior Citizen Savings Scheme (SCSS)
- Monthly Income Scheme (MIS) and Fixed Deposit (FD)
Which Post Office schemes are subject to TDS
The tax conditions for each Post Office scheme vary, so it’s important to understand where your money is tax-free and where it’s taxable before investing.
National Savings Recurring Deposit (RD)
In an RD, you deposit a small amount every month. If your annual interest exceeds the limit of ₹50,000 (ordinary citizens) or ₹1 lakh (senior citizens), the post office will deduct TDS. However, if the interest is below this limit, no tax will be levied.
Senior Citizen Savings Scheme (SCSS)
Investors over the age of 60 invest in SCSS. Deposits up to ₹1.5 lakh in this scheme are eligible for tax benefits under Section 80C, but TDS is deducted if the annual interest exceeds ₹1,00,000.
Monthly Income Scheme (MIS) and Fixed Deposit (FD)
Monthly interest earned on MIS is also fully taxable. If your annual interest exceeds the TDS limit, TDS will be applicable. Similarly, a 5-year post office FD offers tax benefits under Section 80C, but the interest earned on it is taxable. TDS is also applicable to interest earned on 1, 2, or 3-year FDs if it exceeds the threshold limit.
National Savings Certificate (NSC)
TDS is not deducted on interest earned on NSC. This is a big relief! Deposits up to ₹1.5 lakh are also eligible for tax benefits under Section 80C. However, keep in mind that annual interest earned on NSC is added to your total income and is taxable according to your tax slab.
Kisan Vikas Patra (KVP)
Annually earned interest on Kisan Vikas Patra is fully taxable. No TDS is deducted, but upon maturity, you will have to pay tax on this interest according to your tax slab. If the interest exceeds the threshold of ₹50,000 or ₹1 lakh, TDS may be applicable.
