It on fd interest

ITR 239 views 2 replies

G. kashyap

Student

21 Points Joined January 2017

Hello sir

My query is whether the interest on fd is taxed yearly or it will be taxed in the year which the marurity amount is received ? ex. ir mr. x fd ₹50000 and after 5 years he recieve ₹75000 so whether 5000 inyerest is taxed every year for 5 years or 25000 will be taxed in the yera of receipt of maturity and also what is the amount that will be shown in itr u/h ifos whether 75000 or 25000

Replies (2)

CA Devesh Bisht

Chartered Accountant

258 Points Joined August 2012

Interest on FDs is taxable on yearly basis. Generally bank credits interest to depositor’s account every month or quarter. And are under obligation to deduct TDS u/s 194A if interest credited exceeds Rs. 10000 during the year. If suppose banks credits Rs. 5000 every year to your account and pays principal along with interest earned during 5 years at the time of maturity, still interest shall be taxable every year on accrued basis .

Harsh Singhal

81 Points Joined December 2014

Hey, this is a very general problem. In these cases,

Banks deduct TDS on interest as and when interest is accrued, not when interest is paid out. This TDS deducted reflects in your Form 26AS automatically. Hence to prevent confusion in Form 26AS, it is advisable to pay the self assessment tax on your interest income (if applicable) on a yearly basis, and not when the FD matures.

Answer to your query, when you declare interest income as a lump sum amount when your FD matures, there is a possibility that you will be included up to a higher tax slab and pay higher taxes overall. To prevent this, simply pay the tax accrued on your interest income on an annual basis. So, if TDS is not deducted by the bank, take the amount of interest on accrual basis and pay tax accordingly.

On the point of income under OS, mention income accordingly as told above. There is no tax on principal amount, hence 50,000 can never be a part of income under OS.

Cheers !