new delhi finance minister arun jaitleys budget 2015 proposes to introduce tax deducted at source tds for recurring deposits rd amendments made to section 194a will mean that interest income above rs 10000 for an rd will attract tds however for interest income up to rs 10000 there will be no tds apart from this in case an individual has multiple rds with a single bank the cumulative interest income will attract tds if it exceeds rs 10000 explains sailesh multani chief financial planner at edelweiss yet another provision in the budget will ensure that in case an individual has multiple fixed deposits fds with a single bank the cumulative interest income will attract tds if it exceeds rs 10000m adds multani the new provisions will be effective from june 1 2015 currently the definition of time deposits provided in section 194a of the income tax act 1961 excludes recurring deposits therefore payment of interest on recurring deposits by banking company or cooperative bank is currently not subject to tds however in the current budget the fm has proposed to amend the definition of time deposits so as to include recurring deposits within the ambit of tds for deduction of tax us 194a of the act hence interest earned on recurring deposits exceeding rs 10000 will be subject to tax deduction at source at the applicable rates explains amarpal chadha tax partner at ey india according to multani this move will not make rds and fds less lucrative for the investor this is a step in the right direction from the government earlier people used to open multiple fds to evade tds now with both cumulative interest income on fds with a single bank and rds attracting tds a loophole has been plugged in multani told economictimescom there is no case for people to shift away from rds and fds because the income would be taxable irrespective when the tax returns are filed multani added will this move make rds less lucrative for the common man no says chadha the taxability of interest on recurring deposits has not changed however the budget 2015 has proposed that in case the earnings in a year from recurring deposits are more than rs 10000 then the interest will be subject to tax deduction at source and the net interest amount would be paid to the tax payer at the time of payout though there is no change in the taxability the manner in which tax is deducted paid will change in the case of individuals where the total income is below the exemption limit they can submit certain forms to banks to get nil deduction of tax on recurring deposits chadha explains so what alternate investment options can one look at the investment options would depend on the individuals risk appetite and the objective of investment generally public provident fund new pension scheme additional deduction of rs 50000 has been proposed in the budget could be some of the options suggests chadha