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No, the recurring deposit interest amount is not tax free. The interest earned on your recurring deposit is not exempted from income tax that is collected every year. When you file your IT returns, you would have to add the interest income as ‘income from other sources’. The tax would have to be paid at the rate of the tax slab of the recurring deposit holder.
Money that is invested in a recurring deposit will be counted as a part of the annual income of an investor. A 10% will be deducted on the interest that you earn on your recurring deposit. If the amount that you have deposited exceeds Rs. 10,000, TDS(Tax deducted at Source) will be deducted on the interest. The TDS will be 20% if you fail to provide PAN information to the bank. If a customer's income falls under the non-taxable income slab, they would have to submit the Form 15G to be taxed for both recurring and fixed deposits.