Post Office Time Deposit TDS Exemption Limit Hiked: Now, get more from RD, TD, KVP, other small savings schemes

Post Office Time Deposit TDS Exemption Limit: For small savings account holders in Post Office, Budget 2019 came as long-awaited good news. The annual financial statement has proposed to raise the TDS limit on interest income from deposits to Rs 40,000  from the current Rs 10,000. The proposed TDS hike will come into effect from April 1. "TDS threshold on interest earned on bank/post office deposits is being raised from Rs 10,000 to Rs 40,000. This will benefit small depositors and nonworking spouses," Finance Minister Piyush Goyal announced in the budget speech. 

According to Finance Bill 2019, TDS hike on interest income would apply to interest income paid by a bank, co-operative society or a post office. This will not apply to interest earned on securities. The TDS hike means Post Office depositors will be able to save more from small savings schemes. This will also incentivize people to invest in deposit accounts. 

The TDS hike was one of the long-pending demand. An SBI research report on Budget 2019 says, "As of Mar’18 there were 239 million term deposit accounts in banks with per account balance at Rs 2.75 lakh."

Check Post Office Latest Interest Rates on Time Deposit, PPF, Sukanya Samriddhi, NSC, KVP

The report further says, "Assuming 7.5% rate of interest, on an average every term-deposit holder accrued interest of Rs 20,000, out of which he/she has to pay TDS on Rs 10,000. Now that interest earned up to Rs 40,000 is exempted this will bring large relief to all the small depositors and they may deposit up to Rs 5 lakh in term deposits." 

The SBI research observational will apply to Post Office deposits also. Accordingly, the TDS exemption limit hike will encourage investors to deposit up to Rs 5 lakh in Post Office small savings schemes. 

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The report predicts a surge in term deposits (fixed or time deposits) with the lenders in near future. 

Post Office offers savings account, five-year Recurring Deposit accounts, Time Deposit (TD) of one, two, three and five-year durations. It also offers a monthly income scheme account, Senior Citizen Savings Scheme (SCSS) and Kisan Vikas Patra. 

PPF, Sukanya Samriddhi Account, National Savings Certificates (NSC) and 5-year Time Deposit offered by Post Office already qualify for income tax benefits under various sections of the IT Act 1961.