- Supposing a person creates a fixed deposit of Rs. 100,000 for 10 years at 10% interest non-cumulative in the year 2010. He takes the income from the fixed deposit every quarter.
- Therefore the person gets an income of Rs 2500 every quarter (Rs. 10,000 per year). On which Rs. 250 is deducted as TDS every quarter (or Rs. 1000 every year).
- After 5 years the person in January 2015 pre-maturely terminates the fixed deposit.
- The Bank has already paid him Interest for 3 quarters for FA 2014-15 amounting to Rs. 7500 on which Rs 750 has been deducted as interest.
- Because the person Terminated the fixed deposit pre-maturely the bank says that he is eligible only for 9% interest from the beginning (which is the bank rate for 5 years instead of 10 years).
- The bank therefore recovers The extra interest paid.
|
Year |
Total Interest actually Paid @ 10% |
Interest That should have been paid at 9% |
Difference |
|
2010-11 |
10000 |
9000 |
1000 |
|
2011-12 |
10000 |
9000 |
1000 |
|
2012-13 |
10000 |
9000 |
1000 |
|
2013-14 |
10000 |
9000 |
1000 |
|
2014-15 |
7500 |
6750 |
750 |
- The bank therefore after having paid Rs. 7500 in 2014-15 recovers Rs. 4750 from him.
- Therefore the net Income received by this person in the year 2014-15 is Rs. 7500 – 4750 = 2750
The Question is that should this person now pay tax on Rs. 7500 or Rs 2750 for the financial year 2014-15
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