No Tax to be levied on Interest received from Swiss Bank Accounts

Last updated: 06 August 2021

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The Income Tax Appellate Tribunal in Delhi has ruled that interest earned from Swiss bank accounts is not taxable in India if it's not explicitly declared. The tribunal dismissed an appeal by the ACIT, who had wrongly assumed interest was earned based on information from the French government. The court emphasised the principle of 'real income', stating it's illogical to apply Indian interest rates to foreign funds without concrete evidence.

Court :
ITAT Delhi

Brief :
In The A.C.I.T. Central Circle-15, New Delhi v. Shri Krishan Lal Madhok 672, Tulsi Farms, Opp. Nanda Hospital Chattarpur, New Delhi ITA No. 3917 to 3921/DEL/2017 [A.YS 2006-07 to 2012-13] & ITA No.6648/DEL/2017 [A.Y 2007-08], the A.C.I.T. Central Circle-15 ('the Appellants') on the basis of information received from the Government of France under the Double Taxation Avoidance Convention (DTAC) wrongfully assumed that Shri Krishan Lal Madhok ('the Respondents') was earning an interest at the rate of 4% from his foreign Swiss Bank account, thereby included the same in his income while computing his tax returns.

Citation :
ITA No. 3917 to 3921/DEL/2017 [A.YS 2006-07 to 2012-13] & ITA No.6648/DEL/2017 [A.Y 2007-08]

In The A.C.I.T. Central Circle-15, New Delhi v. Shri Krishan Lal Madhok 672, Tulsi Farms, Opp. Nanda Hospital Chattarpur, New Delhi ITA No. 3917 to 3921/DEL/2017 [A.YS 2006-07 to 2012-13] & ITA No.6648/DEL/2017 [A.Y 2007-08], the A.C.I.T. Central Circle-15 ('the Appellants') on the basis of information received from the Government of France under the Double Taxation Avoidance Convention (DTAC) wrongfully assumed that Shri Krishan Lal Madhok ('the Respondents') was earning an interest at the rate of 4% from his foreign Swiss Bank account, thereby included the same in his income while computing his tax returns.

The Hon'ble bench of Income Tax Tribunal, Delhi denied the same as there was no mention of interest in the information provided by the French Government, and held that the Assessing Officer's decision defies the taxability of the concept of real income. It was not logical to compute interest on foreign funds at an interest rate prevailing in India

Dismissed the appeal.

FAQ :

No, according to a Delhi Income Tax Tribunal ruling, interest from Swiss bank accounts is not taxable if it is not explicitly declared and evidenced. The tribunal found it illogical to assume interest income without proof.

The tax authorities based their claim on information received from the French government under a Double Taxation Avoidance Convention, wrongly assuming a 4% interest rate on the individual's Swiss bank account.

The tribunal relied on the principle of 'real income', stating that income is only taxable if it is actually earned and realised. It is not logical to compute interest on foreign funds using Indian interest rates without specific evidence.

The Income Tax Tribunal dismissed the appeal filed by the ACIT, upholding the decision that no tax should be levied on the assumed interest from the Swiss bank account.