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pls help - taxability of interest on FD

som kansal (chartered accountant) (307 Points)

01 August 2008

in the case of a FD of 3 years

whether the interest for the 1st year shall be considered as income from other sources while calculating the income of the assessee..

this is so asked because the interes is not actually credited to the assessee's account bu TDs has been deducted.

pls help as soon as possible

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7 Replies

CA Nitin Wadhwani (Chartered Accountant) (4469 Points)
Replied 01 August 2008

Yes

Taxable As Accrued Income.

1 Like

Pratik K (Student) (3406 Points)
Replied 02 August 2008

but if in the case where later on the Fd is withdrawn before the due date i.e before the 3 yrs then interest rate will be 1 or 2% lower than aggreed.

what should be the treatment then?

1 Like

CA Nitin Wadhwani (Chartered Accountant) (4469 Points)
Replied 02 August 2008

Suppose u Have FD of 5 lacs for three years interest comes to 40000/-, 45000/- and 50000/- (say)

u have filed returned for first and second year and taxed 40 and 50k

then if in the third year year if withdram the amt then interest to be taxed =

Interest Receieved on Withdrawl-Interest Already Taxed(90000/- in this Case)

1 Like

M.Sriram Shenoy (CA Final) (814 Points)
Replied 02 August 2008

Interest on FD can be offered on accrual basis during the fixed term. In my opinion,If the FD is withdrawn before the fixed term and the interest received is lower than the interest offered as income in the IT return, then the excess interest offered as income during the earlier years cannot be taken back. Tax paid on it is "paid".

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Darshu (CA) (1580 Points)
Replied 02 August 2008

Yes the Interest is considered under the head Income from other sources........

1 Like

Devendra Goyal (Service) (24 Points)
Replied 02 August 2008

Dear

Som Kansal

FD Interest is Taxable on due basis is correct. Mr. Shriram Shenoy's Argument is also correct. Once the Tax on Interest is Paid then it is paid, Because there is no any Provision in Income Tax Act that Income of Head Income From other Sources can be Negative.

Regards,

C.A.Devendra Goyal

1 Like