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Loss in income from other sources

akanksha (CA Final Student) (325 Points)

02 August 2014

Hello

An assessee earns income from salary only. He has and OD account with bank. On which he pays interest @ 18%

He also earns some minimum interest on FDRs. Can he Claim the interest paid on OD account as an expense against interest earned on FDR.?

Thanks

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15 Replies

akanksha (CA Final Student) (325 Points)
Replied 02 August 2014

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Tribhuvan Aditya Singh (Student as well as Self-employed) (3710 Points)
Replied 02 August 2014

expenses have not been incurred for earning intt on fdr. therefore it cant be claimed.

akanksha (CA Final Student) (325 Points)
Replied 02 August 2014

but if the assessee breaks his fd and put the amount in his OD then intt would not be paid by the assessee and at the same time interest will not be earned by assessee on fdr

Tribhuvan Aditya Singh (Student as well as Self-employed) (3710 Points)
Replied 02 August 2014

@ akansha... but that wont mean that intt on FD is earned by paying intt on OD.

akanksha (CA Final Student) (325 Points)
Replied 02 August 2014

Then it means thtat assessee should not continue its fdr becz in net sense he is paying the interest and not earning

Tribhuvan Aditya Singh (Student as well as Self-employed) (3710 Points)
Replied 02 August 2014

if you see from income tax purpose, then yes it is not viable to continue.... however if any income is being earned using that OD then claim intt paid as expense from such income.

akanksha (CA Final Student) (325 Points)
Replied 02 August 2014

fdr intt is only earned out of the od money

Tribhuvan Aditya Singh (Student as well as Self-employed) (3710 Points)
Replied 02 August 2014

so you mean to say that the assessee withdraws money from OD and then that amt is converted into FD and intt. is earned........ if this is what you have been trying to say then you can claim expenses as deduction..... ... just out of curiosity i want to ask that why will a person do that earn intt @ 7-8% by borrowing funds @ 18%.

ANUBHAV VISHNOI (-) (150 Points)
Replied 03 August 2014

Interest paid on OD cannot be claimed as an expenses against the income earned on FDR as there is no nexus between expenditure incurred and income earned.

I hope this will clear you.

Thanks

Anubhav (8750089567)

Mihir (Wealth Manager) (5293 Points)
Replied 03 August 2014

Is it a OD or some personal loan from bank? Interest on that cannot be claimed as loss under income from other sources.

akanksha (CA Final Student) (325 Points)
Replied 04 August 2014

First FDR was created.

But due to some reasons, assessee required funds and withdrawn excess money from his bank account.

Now Intt is been accumulated on that OD account.

However, in current FY , i.e 2014-15, Assessee has taken premature payment of FDr and deposited in OD.

Thanks

Tribhuvan Aditya Singh (Student as well as Self-employed) (3710 Points)
Replied 04 August 2014

@ akansha... first you said that fdr intt is earned out of that OD and now you say money was withdrawn from OD after pledging fdr. if you keep changing situations then how can i help you with correct answer....... .... .... if fdr was given as security then you cant claim intt on OD as expense.

ANUBHAV VISHNOI (-) (150 Points)
Replied 04 August 2014

Right,

Even there is no link between OD and Interest earned in FDR. You had already fixed deposit before taking loan. And would say that it is useless to co-relate the interest paid on loan and interest earned in FD. So interest paid cannot be deducted from income on FD.