Taxation on accrued interest

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This discussion addresses concerns about potential double taxation on interest earned from Fixed Deposits (FDs) that extend across multiple financial years. When interest accrues at the end of a financial year, it's taxed, and then taxed again when the FD matures and the full interest is paid. The consensus suggests that while banks may report the total interest paid, for tax filing purposes, individuals should rely on Form 26AS and their Taxpayer Information Summary (TIS) or Annual Information Statement (AIS) which accurately reflect interest and TDS for the current assessment year, thus preventing inflated income and double taxation.

Deepak Shara

Deepak Shara (Querist)

26 June 2024 In case an FD spans over more than one financial year, then the accrued interest at the end of the first financial year is added in income as accrued interest and TDS is deducted. In the next financial year, the interest is paid, so the interest received is added in this year, meaning that the amount equal to the accrued interest is taxed twice. Is it that the banks will show the interest paid in current year after deduction of the accrued interest in the last year? ls this the practice adopted by the banks or they add complete interest paid as income for the current year?

Dhirajlal Rambhia

Dhirajlal Rambhia

(Expert)

27 June 2024 For TDS deduction they calculate only the interest accrued/paid (earned in the same year) in the relevant FY. Even though they declare interest paid in the FY in aggregate of earlier years also.

Deepak Shara

Deepak Shara (Querist)

27 June 2024 Tks Mr Rambhia. However, there is one confusion.
According to you, the bank will declare interest paid in the FY in aggregate of earlier years also which means that the income for the current year will increase, though TDS will not be double. But when I file my IT return, I will consider the interest declared by the Bank and this will inflate my income and I will be calculating higher tax payable for the current year. This actually is my point, not the amount of TDS the Bank deducts.

Dhirajlal Rambhia

Dhirajlal Rambhia

(Expert)

27 June 2024 No.
Check form 26AS, there the interest & TDS data will be only for current year. Take that data for ITR filing. Your TIS/AIS data will be also for current assessment year.

Dhirajlal Rambhia

Dhirajlal Rambhia

(Expert)

29 August 2024 Good Luck.

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