Income tax on maturity value of term deposit

There are 2 ways of computing interest.

1) At the end of each financial year - Ask the bank for an interest certificate and include

    the interest accured during the financial year and pay the tax.

2) After maturity - Add the total interest to your income & pay the tax.

The first method is preferable because it may lead to less tax to be paid in most cases.

If you use the second method - It will result in a higher total income after maturity due to adding of total interest.

I would like to know whether the principle amount ie. 2 laks also taxable in the FY, or  only the acquired interest taxable

only interest income is taxable

If u r an employee, then the deposit amount is out come of ur salary, which is taxable or not depend on the net taxable salary. on the other hand if u r doing business, then it is out come of ur receipts, again which is taxable or not depend on ur net taxable income.

Hence, deposit amount is not taxable, based on the above.

U wud hv claimed deduction u/s 80C for investing FD..Condition is u shud not withdraw for 5 yrs. If u violate that rule, how can u escape on maturity?? Upon maturity that is also taxable

But in reality if u hv salary income, u can escape by not declaring as the chances of getting caught is v less.