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Interest expense whether allowed

Devendra (Chartered Accountant) (4775 Points)

05 October 2011

Mr. X has earned Interest from Saving Bank a/cs from various bank which amounts to Rs. 4150/- also simultaneuosly various banks have debited the Bank charges / interest which comes to around Rs. 1010/-. My question is can the Bank Interest charged by the bank be allowed as a deduction from the bank Interest earned from various banks? (ie. taxable amt Rs. 4150/- or Rs. 3140/- [4150-1010] please guide me.

Regards,

Devendra K

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7 Replies

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 05 October 2011

such interests / bank charges paid is allowed only for business related accounts, not for personal accounts.

Sharad Saini (Student) (286 Points)
Replied 06 October 2011

I think that bank charges related to personal A/c are not allowed as they are not for earning intt but for other things/services that banks provides....

Hari Wadhwa (CA in Practice) (485 Points)
Replied 06 October 2011

Hi Devendra,

Bank charges are not llowed to be claimed for deduction against the income of Assessee unless he/she is having "Income u/h business or profession". Further, the Bank Account must be used for business or profession.

From the available facts & the term used by you "Saving Bank", it seems that either the assessee does not have income u/h Bus or profession OR the Bank account is not being used in business/profession, thus, the Bank charges are NOT DEDUCTIBLE.

nimish solanki (IPCC CLEARED) (108 Points)
Replied 06 October 2011

Hello,

As expense are not incurred to earn income(interest), they won't be allowed

Harshal Fifadra (Chartered Accountant) (1489 Points)
Replied 06 October 2011

Agree with nimish solanki .....

CA NEERAJ SHARMA (practice) (408 Points)
Replied 12 October 2011

thanx Hari For Sharing ur Valueable Knowledge

arjun s (CA Final) (299 Points)
Replied 12 October 2011

The bank charges are not related to that bank charges received it should not be deducted as the act says any expenditure not incurred in relation to that income is disallowed