WhicMethod of a/cing to be followed ????????
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
17 May 2011
Hello experts!
We have a new client age 79 yrs.Uptill now she has never filed any Return as she is a house wife and had no personal income.In the FY2010-2011 she recieved the following amt for sale of land (taxable as per IT definition) whic she inherited frm ancestor.
35,000 ,Rs35,000 etc during the whole yearat specified interval as an advanced till total reached Rs7,00,000/- as cosideration of sale. But actual trf of ownership did nt take place untill 30.3.2011
Qurries are as follows :
1.She had invested whnever money was rec inFD for short term period & after 1.4.2011 7,00,000 will be invetsd in SEC54EC-NHAI BONDS for exempetion. so som amt is still in fd s thn whth "Int on fds shld be taken on "ACCRUAL basis or RECIEPT basis
considering this is d first tim she filint ITR and has no other incom?
2.She did nt pay advance tax(during FY 2010-11) as she was going to invets the whol cosideration in NAHI bonds.
Whther ANY INTREST WILL BE LEVIED U/S234B/C? WHEHER ANY PENALTY IS LEVIABLE for non payment of ADVANCE TAX condiering that after investing in NHAI bonds ther in no tax payable i.e. NIL tax comes after calculating tax on Total income ?
pls reply n thnxx in adv.
We have a new client age 79 yrs.Uptill now she has never filed any Return as she is a house wife and had no personal income.In the FY2010-2011 she recieved the following amt for sale of land (taxable as per IT definition) whic she inherited frm ancestor.
35,000 ,Rs35,000 etc during the whole yearat specified interval as an advanced till total reached Rs7,00,000/- as cosideration of sale. But actual trf of ownership did nt take place untill 30.3.2011
Qurries are as follows :
1.She had invested whnever money was rec inFD for short term period & after 1.4.2011 7,00,000 will be invetsd in SEC54EC-NHAI BONDS for exempetion. so som amt is still in fd s thn whth "Int on fds shld be taken on "ACCRUAL basis or RECIEPT basis
considering this is d first tim she filint ITR and has no other incom?
2.She did nt pay advance tax(during FY 2010-11) as she was going to invets the whol cosideration in NAHI bonds.
Whther ANY INTREST WILL BE LEVIED U/S234B/C? WHEHER ANY PENALTY IS LEVIABLE for non payment of ADVANCE TAX condiering that after investing in NHAI bonds ther in no tax payable i.e. NIL tax comes after calculating tax on Total income ?
pls reply n thnxx in adv.
17 May 2011
1.She had invested whnever money was rec inFD for short term period & after 1.4.2011 7,00,000 will be invetsd in SEC54EC-NHAI BONDS for exempetion. so som amt is still in fd s thn whth "Int on fds shld be taken on "ACCRUAL basis or RECIEPT basis
considering this is d first tim she filint ITR and has no other incom?
Ans It will be better to Show interest on FDR on Accrual basis as Bank will deduct TDS on the accrual basis only.
considering this is d first tim she filint ITR and has no other incom?
Ans It will be better to Show interest on FDR on Accrual basis as Bank will deduct TDS on the accrual basis only.
17 May 2011
2.She did nt pay advance tax(during FY 2010-11) as she was going to invets the whol cosideration in NAHI bonds.
Whther ANY INTREST WILL BE LEVIED U/S234B/C? WHEHER ANY PENALTY IS LEVIABLE for non payment of ADVANCE TAX condiering that after investing in NHAI bonds ther in no tax payable i.e. NIL tax comes after calculating tax on Total income ?
Ans: She is not liable to pay Advance Tax as no capital gain has arisen to her so far , on the basis of factual position that the transfer of property has yet not taken place.
Whther ANY INTREST WILL BE LEVIED U/S234B/C? WHEHER ANY PENALTY IS LEVIABLE for non payment of ADVANCE TAX condiering that after investing in NHAI bonds ther in no tax payable i.e. NIL tax comes after calculating tax on Total income ?
Ans: She is not liable to pay Advance Tax as no capital gain has arisen to her so far , on the basis of factual position that the transfer of property has yet not taken place.
Querist : Anonymous
Querist :
Anonymous
(Querist)
17 May 2011
Thnk u sir for your valuable reply!
bt in case of ur first reply ther is no q of TDS to be deduccted by bks since she has smartly invetsed in suc a manner tht total intrst does not exceed rs 10,000/- in any of the fds as she has taken diff fds of diff bks thn on whic basis to be shown
becoz since trf took in the yr of 2010-2011 she is getting an exemption limit of RS 240,000/- & if i tak it on accrual basis thn intrst crosses rs2,40,000 n she need to pay tax.if i tak it on recpt basis thn it splits in 2 diff FY n gets adv of more slab limit i.e Rs5,00,000 for AY 2012-13.
so is theR ny prov/circular/notification whic mention tht for people with INCom frm other sources only must go in for accrual basis n nt recpt basis???
Thnk u sir once again.
bt in case of ur first reply ther is no q of TDS to be deduccted by bks since she has smartly invetsed in suc a manner tht total intrst does not exceed rs 10,000/- in any of the fds as she has taken diff fds of diff bks thn on whic basis to be shown
becoz since trf took in the yr of 2010-2011 she is getting an exemption limit of RS 240,000/- & if i tak it on accrual basis thn intrst crosses rs2,40,000 n she need to pay tax.if i tak it on recpt basis thn it splits in 2 diff FY n gets adv of more slab limit i.e Rs5,00,000 for AY 2012-13.
so is theR ny prov/circular/notification whic mention tht for people with INCom frm other sources only must go in for accrual basis n nt recpt basis???
Thnk u sir once again.
17 May 2011
ONE THING U HAVE NOT DISCUSSED WHETHER SHE HAS GIVEN THE POSSESSION OF PROP TO BUYER IF YES THEN THE CAPITAL GAIN WILL ACCRUE EVEN IF THE TRANSFER IS REGISTERED LATER ON
CA MANOJ GUPTA
JODHPUR
09828510543
CA MANOJ GUPTA
JODHPUR
09828510543
Querist : Anonymous
Querist :
Anonymous
(Querist)
17 May 2011
No possession is wit us only
03 August 2025
Here’s a clear summary of the accounting and tax treatment based on your scenario:
1. Method of Accounting for Interest on FDs (Accrual vs Receipt Basis)
Accrual Basis is generally the correct method as per Income Tax rules and accounting standards, especially for interest income.
Why accrual? Bank interest is considered earned as it accrues—even if not yet received.
TDS by banks is also deducted on accrual basis, so it aligns with tax deductions.
However, your concern about slab limits and exemption thresholds is valid:
Taking interest on receipt basis splits income over two financial years, potentially reducing tax burden.
Taking interest on accrual basis shows entire interest in one FY, which might increase taxable income.
But legally and practically, interest income should be reported on accrual basis unless specific provisions allow otherwise.
2. Advance Tax & Capital Gains on Sale of Land
Capital gains arise only when transfer of ownership/possession happens.
Since possession was not given until 30.3.2011, capital gain accrual is considered in FY 2010-11.
Advance tax liability arises only when taxable income is expected; if the full consideration is planned to be invested in Sec 54EC (NHAI Bonds) for exemption, no advance tax penalty should arise.
If no advance tax was paid, interest under Sections 234B and 234C is generally not leviable if total tax liability is NIL after exemption.
3. Possession vs Registration
Capital gain is generally recognized when possession or control is transferred, even if registration happens later.
Since possession is not given yet, capital gain is considered not accrued until possession is handed over.
Summary
Issue Recommended Treatment
Interest on FDs Show on Accrual Basis (aligned with bank TDS)
Advance Tax Liability Not applicable if full exemption under Sec 54EC planned and possession not transferred
Capital Gains Accrue on transfer of possession, not just receipt of amount
Tax Filing File ITR for FY 2010-11 including accrued interest and capital gains as per above rules
Additional points:
No specific circular mandates interest on FDs be shown on receipt basis. Accrual is the norm.
Tax benefits/exemptions under Section 54EC should be claimed timely to avoid tax on capital gains.
Keep clear records of possession and payment dates.
1. Method of Accounting for Interest on FDs (Accrual vs Receipt Basis)
Accrual Basis is generally the correct method as per Income Tax rules and accounting standards, especially for interest income.
Why accrual? Bank interest is considered earned as it accrues—even if not yet received.
TDS by banks is also deducted on accrual basis, so it aligns with tax deductions.
However, your concern about slab limits and exemption thresholds is valid:
Taking interest on receipt basis splits income over two financial years, potentially reducing tax burden.
Taking interest on accrual basis shows entire interest in one FY, which might increase taxable income.
But legally and practically, interest income should be reported on accrual basis unless specific provisions allow otherwise.
2. Advance Tax & Capital Gains on Sale of Land
Capital gains arise only when transfer of ownership/possession happens.
Since possession was not given until 30.3.2011, capital gain accrual is considered in FY 2010-11.
Advance tax liability arises only when taxable income is expected; if the full consideration is planned to be invested in Sec 54EC (NHAI Bonds) for exemption, no advance tax penalty should arise.
If no advance tax was paid, interest under Sections 234B and 234C is generally not leviable if total tax liability is NIL after exemption.
3. Possession vs Registration
Capital gain is generally recognized when possession or control is transferred, even if registration happens later.
Since possession is not given yet, capital gain is considered not accrued until possession is handed over.
Summary
Issue Recommended Treatment
Interest on FDs Show on Accrual Basis (aligned with bank TDS)
Advance Tax Liability Not applicable if full exemption under Sec 54EC planned and possession not transferred
Capital Gains Accrue on transfer of possession, not just receipt of amount
Tax Filing File ITR for FY 2010-11 including accrued interest and capital gains as per above rules
Additional points:
No specific circular mandates interest on FDs be shown on receipt basis. Accrual is the norm.
Tax benefits/exemptions under Section 54EC should be claimed timely to avoid tax on capital gains.
Keep clear records of possession and payment dates.
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