• Notification Date: 08-06-2023
• Notification No: N/A

TDS Charges on Post Office Schemes

Post office offers many long-term and short-term investment plans but note that not all investment avenues are tax free, as some Post office schemes interest earned is taxable, and no deduction is available under section 80C of the Income tax Act, 1961. 

It is important to keep in mind that TDS is only deducted from certain transactions when the payment's value exceeds the designated threshold. If the figure does not exceed the predetermined level, no TDS will be deducted. 

What is TDS 

'Tax Deducted at Source' is referred to as TDS. It was created to take tax payments directly from the source of an individual's income. TDS is a mechanism used by the government to collect taxes to reduce tax evasion by collecting revenue (either fully or partially) as soon as it is earned rather than later. 

The following categories specifies the post office investment schemes on which TDS is deducted and on which TDS is not deducted. 

1. India Post Recurring deposit 
The bank or post office will deduct tax at source from the interest received on your recurring deposit if your interest income exceeds Rs. 40,000 for general citizens. No tax will be deducted from recurrent deposits made at a bank or post office if the amount is below the threshold level. For senior citizens, the limit to deduct TDS is Rs 50,000. 
 
2. India Post Time deposit 
Under Section 80C of the Income Tax Act, the deposit amount (up to Rs. 1.5 Lakhs) under the 5 Years TD will be eligible for a tax deduction. This means that deposits made into TD accounts with a year, two years, or three years are not eligible for a tax deduction. 

Under this scheme, TDS will be deducted. 
 
Interest obtained through this plan is taxed. When filing your tax returns, you must include interest income under "Income from Other Sources" and pay the appropriate income tax rate. 

3. Post Office Monthly Income Scheme Account (MIS) 
Interest earned is taxable, and no deduction under Sec 80C for deposits made. TDS to be deducted on interest earned for more than Rs 40,000 and Rs 50,000 in case of senior citizens. 
 

4. Senior Citizen Savings Scheme (SCSS) 
Under the Senior Citizen Savings Scheme (SCSS), tax benefit is available under Section 80C for deposits. TDS is to be deducted on interest earned for more than Rs 50,000 p.a. 
 
5. Mahila Samman Savings Certificate 
Under the Mahila Samman Savings Certificate, TDS is to be deducted on interest earned for more than Rs 50,000 p.a. for senior citizen and Rs 40,000 for general citizens. 
 

6. Public Provident Fund Account (PPF) 
PPF falls under exempt, exempt, exempt category, tax rebate will be available under Section 80C for deposits (maximum Rs 1.5 lakh p.a.), and interest is tax-free. 
 
7. National Savings Certificates (NSC) 
The National Savings Certificate deposits up to Rs. 1.5 lakhs are eligible for a tax benefit under section 80C of the Income Tax Act. TDS does not apply on the interest amount of NSC, unlike fixed deposit. 
 

8. Kisan Vikas Patra (KVP) 
Since KVP is not eligible for 80C deductions, the returns are entirely taxable. However, tax deducted at source (TDS) is not applied to withdrawals made after the scheme's maturity.