Interest paid to bank for over draft

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

09 August 2016 Hi I am a proprietor. I made a fixed deposit and opened up an overdraft account on my name. Now with that I booked a space in an under constructed mall. Builder is paying me 12% assured return on the payment I made to him and deducting TDS under section 194A. Bank is also deducting TDS on the interest paying to me on my fixed deposit. But I am also paying interest to bank on overdraft. Now my CA is saying that I will have to show both the income as other income but I can not show the interest as other expenses I am paying to bank.

Please suggest.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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09 August 2016 1.In my view, you can claim interest paid on OD against the Interest Received from the builder. However, you have to show the balance as income from other sources (IFOS) in case interest received from the builder is more than OD Interest payable.
2. You have to show FDR interest as IFOS along with 1.

Z (Expert)
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09 August 2016 Deduction shall be allowed against an income IF the overdraft was taken i.e expense was incurred specifically to earn THAT income ,and not otherwise.
If this is the case then I fully agree with Paras sir.

If however, overdraft was not taken specifically to earn the money then interest on overdraft can not be adjusted.

Further, generally while accepting FDRs , banks require you to give certain declarations and one of them is that the money deposited by you is not a borrowed money. [This may not be in every case.]