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Interest income

Ramakrishnaraju (supervisor) (211 Points)

10 February 2013

I've voluntiarly shown that i had a fixed deposit of Rs.2.00 lakhs in a local co-operative bank @ 10.5% interest for one year and I have shown that Rs.21,000/- received as interest and ofcourse another 1 lakh deposited for 5 years. My DDO says that Section 80 L has been removed and hence I have to pay IT for the 21000/-. Is it correct? and whether the interest for the 5 year FD should also be taken now ? what is the Section under which I can get the Interest deduction of Rs.12,000/- (earlier it was 80 L). Advise me on this.

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Devendra (Chartered Accountant) (4775 Points)
Replied 10 February 2013

1) As the Interest received by you is exceeding the threshold limit ie. Rs. 10000, so the bank should have deducted TDS @ 10% u/s 194A on the interest credited to your account. Also you should submit a photocopy of the PAN card to your bank. (If PAN not submitted, then TDS to be deducted @ 20% p.a)

2) If your income for the year, does not exceed thebasic exemption limit, then there is no need to pay income tax. And if the bank still deducts TDS, the the TDS shall be agin come to your bank account as Income Tax Refund.

3) Interest for the 5 year fixed deposit should be shown in at each year end on proportionate basis. No need to show the Bank interest of 5 years in one year itself.

4) There is no section as such which provides interest as deduction.

Regards,

Devendra Kulkarni

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