Treatment of Income Tax on FD Interest

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1) My mother, a retired school mistress has opened Fixed Deposit with some banks in 2010 with a tenure of 36 months ( maturity in 2013) and the matured amount would be available on maturity in 2013.

What will be the tax treatment on the interest earned? Whether the interest earned on FD shall be deemed to be income for the particular FY on pro- rata basis or whether the entired maturity amount will be treated as income in 2013?

2) In there any exemption for reinvestment in FD for the matured amount with the same bank?

 

Replies (1)
Originally posted by : ALAK MAZUMDER

1) My mother, a retired school mistress has opened Fixed Deposit with some banks in 2010 with a tenure of 36 months ( maturity in 2013) and the matured amount would be available on maturity in 2013.

What will be the tax treatment on the interest earned? Whether the interest earned on FD shall be deemed to be income for the particular FY on pro- rata basis or whether the entired maturity amount will be treated as income in 2013?

2) In there any exemption for reinvestment in FD for the matured amount with the same bank?

 

 

1. The interest will be taxable on actual basis. The bankers credit the actual intrerest every year to the fixed deposit. So, it will be taxable in the year of accrual. For this purpose, you need to take an "interest certificate" from bank so that you can get the amount of interest accrued.

 

2. There is no exemption on basis of re-investment in the same bank. However, there is a provision for deduction u/s 80C if the Fixed Deposit is made in a scheduled bank for a period of at least 5 years.


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