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Income from interest on fixed deposit

Lalit Sangani (M.Com. Asst. Manager Account) (731 Points)

28 July 2014

Dear All,

one of my freind earned his salary 1.90 thousand in F.Y. 2013-14, and earned Interest on Fixed deposit Rs. 18000/-, but Fixed deposit is auto renewal and interest not credited in his account, fixed depost renewed with interest amount. (2,00,000 + 18000 = 218000)

My query is :

1. Interest on F.D. will be taxable which is not credited in his account

2. what income he has to show in his return, only salary or salary with intt. on F.D.

3. Which ITR to be use.

Thanks

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6 Replies

Hitesh Khanna (Accounting & Finance Taxation Company Law Audit ) (839 Points)
Replied 28 July 2014

As per the details furnished by you, your friend has earned Rs. 18000/- as Interest which has been auto renewed and added with the principal amount.

Pls confirm that whether Rs. 18000/- is the Gross Interest Amount or Net Interest (Rs 18000) after deducting TDS(Rs. 2000) ie Interest on FD earned Rs. 20000/-

1. Yes the Interest on FD is Taxable. Interest Income is already his earned Income. He must include Interest on FD while computing his Taxable Income.

2. In his Return of Income He has to Show Incom e From Salary and Interest on FD and Other Income that he may have earned during the relevant year.

3. Keeing just the given Two income : Income from Salary and Interest on FD and One Obvious Income Income from Savings Accounts (Interest On Savings Exempt upto Rs. 10000/-) , He has to file ITR-1 (Sahaj)

1 Like

Lalit Sangani (M.Com. Asst. Manager Account) (731 Points)
Replied 28 July 2014

He has submitted form 15G for non duedction of TDS, hense tds not deducted by bank.

I have two more confusion ;

1. If he earned interest from F.D. Rs. 9000 and Rs. 3000/- from Saving account than which amount will be taxable 9000/- or 12000/-.

2. if he earned Interest on 14 may 2014 (from 15 May 2013 to 14 may 2014) than tax will be applicable only for F.Y. "2014-15" or "2013-14 and 14-15 both) (part of the period of both F.Y.).

Thanks

Lalit Sangani (M.Com. Asst. Manager Account) (731 Points)
Replied 28 July 2014

Mihir (Wealth Manager) (5293 Points)
Replied 28 July 2014

Check 26AS to see if they have deducted TDS on FD interest. If they have, then ask for form 16 from the bank and accordingly show interest income for the year in your ITR.

1 Like

Z ( ) (2960 Points)
Replied 28 July 2014

Further you can claim exemption u/s 80TTA of upto 10,000 for interest from SAVINGS A/C

If you have given the form for non deduction of tax then they would'nt have deducted tax at source,but still, as Mr. Mihir Said you can check 26AS to see whether theres any deduction, & if theres then ask for Form 16A (16 is for salary)

Date of accrural of interest is when constructive credit is given in the account,which is generally twice a year, Interest does not accrues on daily basis,though it is computed on daily basis.It accrues when you get the right to recieve it There is a case of Federal Bank Ltd. 2008 wherein it was upheld that only real income is assessable to tax, even if interest income is bifurcated in the books as receivable in course of time, it will not mean that interese has infact been accrued.

Suppose interest is given in Dec and MAY, then for FY12-13 you wont bifurcate the interest recevied in MAY 2013 into Jan-Mar and Apr-MAY

1 Like

Ajay Balasubramanian (ACA) (114 Points)
Replied 29 July 2014

To check whether Interest income is categorised as taxable or not is based on below:

1. Interest to be attained to qualify tax is based on ACCRUED concept and not CREDITED requirement. Since even though the interest is not credited it is in your free will to retrieve that income either by breaking your FD or etc. so you have rightfully earned it.

2. You can show it under Interests earned which can be filed under ITR 1