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Tax on Interest Income-Accrued vs Paid

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Sreekanth

Student

23 Points Posted on 26 December 2020

I have a query regarding payment of income tax on the interest earned on Fixed Deposits.

Suppose during the FY 2018-19 the bank had deducted tax on both the interest credited to the account as well as the accrued interest. During the next FY 2019-20 the accrued interest will be paid to the account on the maturity of the deposit and the bank would again deduct Tax on the interest paid.

Wouldn't it be taxing the same interest income twice?

Replies (3)

Quick Summary

This discussion addresses concerns about potentially being taxed twice on Fixed Deposit interest income. The user notes that banks may deduct tax (TDS) on both accrued interest and interest paid out upon maturity. While banks typically operate on an accrual basis for TDS, the user's deposit interest certificate shows tax deducted on a combined amount of interest paid and accrued. The core issue is ensuring the same interest isn't taxed twice.

JATINDER KUMAR

Accountant

2102 Points Posted on 26 December 2020

Bank deduct TDS as per accural basis not paid basis so bank can not deduct TDS twice

ayusmita

Tax consultant

3466 Points Posted on 27 December 2020

Bank decucted tds on the interest when it is earned even though you not get it at that time
and bank decucted as per accural basis

Sreekanth

Student

23 Points Posted on 27 December 2020

Thanks Jatinder Kumar for the reply.

When I looked into the Deposit Interest Certificate issued by the bank, there is interest paid and interest accrual and 10% tax has been deducted on the combined amount, not just on the accrued amount.