Interest income

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p k mohanty (Querist)
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03 July 2012 Dear Sir,
I have a query. I am filling up ITR2 in the excel utility provided by IT department. I have interest income of Rs.12683/- in 2011-12, for which TDS has been deducted by the bank at 10% i.e. Rs.1269/-.
While filling up the ITR2, when I am entering the total interest income as above in schedule OS as income from other source, the utility is calculatin tax on it at the prevailing rate of 30% plus Edu cess(since my total income is > 10lakh), which means I have to pay more tax on the interest.
Pl. let me know, what is the actual rate of tax on such income, and whether it can be classified as income to be taxed at special rate and where to enter this income in ITR? tHANK YOU.

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)
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03 July 2012 Interest income is included in the total income and taxable at slab rate.

Tax is calculated on the total income including the interest income.

Since you are in the 30% tax slab, you will have to pay additional tax on the amount of interest.

Interest is NOT taxable at slab rate. It is included in the total income and taxed at normal rates.

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p k mohanty

p k mohanty (Querist)
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03 July 2012 Dear Bharadwaj sir,
Thanks for your kind and prompt reply.
However, I could not get "interest is not taxable at slab rate.It is included in the total income and taxed at normal rates"
My queries are:
1.What is the difference between interest and interest income? Is it if total interest does not exceeed 10K it is interest and more than that is interest income.
2.Why the banks deduct at 10% without any regard to the person's slab rate.
3.Can I now pay the extra tax payble by me.
Thank you again.

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)
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03 July 2012 1. Oh sorry. I wanted to write, interest is not taxable at SPECIAL RATE.

2. When you are in receipt of interest, then it is your income. You may call it interest or interest income. It is one and the same thing, irrespective of the amount.

3. Banks deduct TDS @ 10% because Section 194A of the Income Tax Act requires them to deduct TDS @ 10% if the amount of interest exceeds Rs. 10,000.

They cannot deduct TDS at lower or higher rate. It is a flat rate of 10%.

4. You can pay the excess amount by way of self assessment tax.

p k mohanty

p k mohanty (Querist)
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03 July 2012 Dear Sir,
Thnaks a lot for clarifying my doubts.
That makes a day for me.

Thanks and Regards,

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