Fd interest reversal

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Suresh N (Querist)
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07 July 2012 Dear Experts,

Let me explain the tax consequence of Interest reversal on foreclosure FD.

Say example, If a person opened a FD for 5 Years @10% p.a. and accrued interest has been taxed for first 3 years and the TDS also claimed in the concern years. Now the person foreclose the FD in the 4th year. The banker rework the interest for 3 years @ 8% and excess interest given on first 3 years reversed.

My query is :

1.What is the treatment for the reversed interest and where I have to show in the computation of income?

2. What about the TDS deducted on first 3 years?

Thanks in advance

CA CS Amit S. Kedia

CA CS Amit S. Kedia (Expert)
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07 July 2012 TDS which has already been deducted could be claimed in that year only. You are not required to do anything for that.

For income tax that you have paid extra in the earlier years. Now, you can claim the deduction of interest reversed u/s 57 or 36 as the case may be.

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CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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07 July 2012 When FD is withdrawn at pre-maturity reversal of interest is made. It can be said that negative income arises to the depositor at that point of time. You can show it under Income from other Sources without disturbing or making any adjustment in the earlier's income and TDS amount.
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