Query On Net Interest Calculation On FD and Loan Against FD For ITR

Declare interest income as 7 K...            

For income tax purposes, the entire ₹7,000 interest earned on your fixed deposit is taxable under the head "Income from Other Sources."

The ₹4,000 interest paid on the loan taken against your FD is not deductible while computing taxable income because personal loan interest is not an allowable deduction under the Income Tax Act unless the loan is used for a specific taxable purpose (such as business or investment in income-generating assets).

So, you need to pay tax on the full ₹7,000, not just the net ₹3,000.