Post Office RD covered us80c
This query is : Resolved
01 August 2008
Can u plz sugges is that if we make Post office RD for 5year then it will cover under sec80c for deduction or not.
02 August 2008
No, for the simple reason all moneys except the first monthly instalment deposited will not lie there for five years.
02 August 2008
Deduction is available for a term deposit for five years in a scheduled bank. There is no statutory definition to indicate the meaning of "term deposits". The RBI's master circulars define it thus: "Term deposit means a deposit received by the bank for a fixed period and which is withdrawable only after the expiry of the said fixed period and shall also include deposits such as Recurring/Cumulative/Annuity/Reinvestment Deposits/Cash certificates and so on."
Since the income-tax law does not have a definition, the RBI's can be safely taken as correct. Section 194A Explanation 1 has a definition of the term "time deposits" to mean deposits repayable on the expiry of fixed period and excludes recurring deposits. This definition is given for the specific purpose of Tax Deducted at Source on interest income.
In view of the above, it seems that Recurring Deposit should be elegible for deduction under Section 80C.
Since the income-tax law does not have a definition, the RBI's can be safely taken as correct. Section 194A Explanation 1 has a definition of the term "time deposits" to mean deposits repayable on the expiry of fixed period and excludes recurring deposits. This definition is given for the specific purpose of Tax Deducted at Source on interest income.
In view of the above, it seems that Recurring Deposit should be elegible for deduction under Section 80C.
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