Urgent

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

18 August 2014 Dear Sir,
If a contractor puts some fd as security in contractee department and he opts for sec. 44AD. Then Interest accrued on such fds will be added with gross receipts
or
It will go in interest income in the head of income from other sources.

Please clarify.

Nikhil Kaushik

Nikhil Kaushik (Expert)
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18 August 2014 ideally this interest should be put under income from other sources.

Querist : Anonymous

Querist : Anonymous (Querist)

18 August 2014 but in most of balance sheets of contractors I see interest income in credit side of P&L a/c ? Then why they dont show it in the head of income from other sources?

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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02 August 2025 Urgent clarification:

Interest accrued on FDs kept as security deposit by a contractor **ideally belongs to "Income from Other Sources"** and should be reported under that head in the Income Tax Return, especially when the contractor opts for **Section 44AD** (which applies to business income).

However, in many practical cases, contractors include such interest income in the **Profit & Loss Account under "Other Income" (credit side)** because:

* It is part of their overall financial income, and
* For internal accounting and bookkeeping convenience, many include all incomes in P\&L to show total earnings.

**But for tax purposes**, interest on security deposits or FDs should be treated separately as income from other sources, **not added to gross receipts under Section 44AD**.

If you want to stay fully compliant, declare interest income separately under other sources.

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