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Long Term FD - Accrual or Actual Basis in ITR? Plz suggest

Tax queries 975 views 2 replies

Hi All,

In case of long term Fixed Deposits (say 3-4 yrs), which is a better option - Showing Interest earned in ITR on Actual Basis or Accrual Basis?

I understand that either one of the modes should be followed consistently. 

Now, in case of Accrual basis - Suppose there is a 2 yr FD at 8% interest P.A. And if I show it on accrual basis in ITR for the first yr and during the second yr I make a premature withdrawal due to which the interest becomes say 7% P.A. How will the the already filed interest amount in ITR be managed then? Just asking this for knowledge!? :)

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Originally posted by : saurav

Hi All,

In case of long term Fixed Deposits (say 3-4 yrs), which is a better option - Showing Interest earned in ITR on Actual Basis or Accrual Basis?

I understand that either one of the modes should be followed consistently. 

Now, in case of Accrual basis - Suppose there is a 2 yr FD at 8% interest P.A. And if I show it on accrual basis in ITR for the first yr and during the second yr I make a premature withdrawal due to which the interest becomes say 7% P.A. How will the the already filed interest amount in ITR be managed then? Just asking this for knowledge!? :)

interest is to be accounted on accrual basis as on 31st march every year for a fair view of balance sheet and income accounted for the year. 

 

for pre mature withdrawals its penalty , u can adjust the penalty from the interest accrued for that year, in case of negative interest its just penalty and cant be adjusted anywhere except interest. 


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