Accrued interest on TDR

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This discussion clarifies the treatment of accrued interest on a Term Deposit Receipt (TDR) where interest is payable at maturity. It explains that interest must be recognised and is taxable in the year it accrues, even if not yet paid. The process involves accounting for accrued interest annually, potential TDS deductions, and how this reflects in tax records.

Jetendra Saini

Jetendra Saini (Querist)

05 September 2020 Sir,
I would like to know the treatment of Accrued interest income in case of following TDR:

Date of Deposit: 01.01.2017
Date of Maturity: 01.01.2020
Accrued interest as on 31.03.2017:X
Accrued interest as on 31.03.2018:Y
Accrued interest as on 31.03.2019:Z

X is included in Y and Y is included in Z.

How accrued interest will be calculated for the FY2017-18, 2018-19,2019-20.

Please help me regarding this. Thanks.

KAVIRAJA ADDANGADI

KAVIRAJA ADDANGADI (Expert)

05 September 2020 Every year bank will credit accrued interest on FD end of financial year ,you can obtain interest statement from bank on same bank will do tds , if you give form 15G/H same will reflect in 26As

Jetendra Saini

Jetendra Saini (Querist)

05 September 2020 Sir, what will be the accounting treatment if interest is only payable at Maturity. (being a petty principal amount, No TDS to be deducted)

KAVIRAJA ADDANGADI

KAVIRAJA ADDANGADI (Expert)

05 September 2020 As per income tax you have to recognise interest in the year which accrued same can be added to FD /TD , accrued interest is taxable as income from other sources even though interest is paid at maturity.
Each year extent of tds adjusting
fDR/Tdr a/c dr
TDS receivable Dr
interest on FD

On maturity

bank dr
fd/Td Cr

Jetendra Saini

Jetendra Saini (Querist)

05 September 2020 Thank you sir. It helped me a lot.

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