22 June 2009
Dear sir I have cumulative deposit with a nationalised bank. I will get interest amount around Rs 3 Lacs by 2011. I am informed that, under provisions of section 194(a), the bank need not deduct tax till payment is made. I have no other income. My question is.
Can I file return with income tax department showing interest on accrual basis and pay applicable tax every year from now on marcantile basis?
Or Shall I have to wait till the deposit is matured and tax deduction certificate is recieved by me. At that time income pertaining to 3 years will be taxed in one single year.
22 June 2009
I think you should hold the income for coming years, as the minimum taxable amount limit will be increased every year, you will come in small tax bracket.
22 June 2009
Agreed with Gurdeep Singh. Bank has to deduct tax on accrual basis. There is no provision of crediting total interest at the end of maturity of deposit. It has to be credited to party account quarterly. Therefore bank will deduct the tax annually. You will have to show your income on accrual basis.
CAclubindia
