In which head will you tax interest income from Fixed Deposits with Banks?

Open uri20170510 32134 ughyv5?1494421703 gunesh asked almost 3 years ago

Hi Friends, I am Gunesh. I am preparing for CA exam. I want to know about income tax. May I know, In which head will you tax interest income from Fixed Deposits with Banks?

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8 Answers
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 megha answered over 2 years ago

Hello, Here is your answer > Interest income from FD with banks will be taxed under the head" > Income from Other Sources".

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 narahari answered over 2 years ago

Interest that is earned on fixed deposits is taxable in the hands of the depositor as per the income slab so a person who earns income between 2 lakh to 5 lakh pays only 10% tax on it while person who earns above 10 lakh pays 30% tax (And education cess and surcharge at the rate of 3%) If the aggregate interest income from fixed deposits that you are likely to earn for all your deposits held in a branch is greater than Rs 10,000 in a financial year, you become liable for TDS . From 1 June 2015 TDS will be levied if the combined interest income from FDs in all branches of a bank exceeds Rs 10,000 in a year. If PAN is not submitted TDS is deducted at the rate of 20%.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Chirag answered almost 3 years ago

Fixed Deposit(FD) is an investment product which allows you to invest a lump of money for a fixed time period and at a fixed rate of interest. Its features are as follows: Interest that is earned on fixed deposits is taxable in the hands of the depositor as per the income slab so a person who earns income between 2 lakh to 5 lakh pays only 10% tax on it while person who earns above 10 lakh pays 30% tax (And education cess and surcharge at the rate of 3%) If the aggregate interest income from fixed deposits that you are likely to earn for all your deposits held in a branch is greater than Rs 10,000 in a financial year, you become liable for TDS . From 1 June 2015 TDS will be levied if the combined interest income from FDs in all branches of a bank exceeds Rs 10,000 in a year. If PAN is not submitted TDS is deducted at the rate of 20%. TDS is also deducted on interest earned or accrued ,but not yet paid, at the end of the financial year. If you have gone for cumulative option in FD which pays interest at maturity still interest would be earned every year and TDS if applicable would be deducted though you DID NOT get the money. A consolidated TDS Certificate in Form 16A, for TDS deducted during a financial year will be issued in the month of April of the following financial year. TDS deducted comes up in your Form 26AS which tied to your PAN number. Details in it should match the Form 16A provided by bank to you. Tax liability is calculated on the first applicant’s name. The second or joint holder has no tax liability. Deposits held by minors,as first account holder, is also subject to TDS. In this case the interest income will be clubbed under the income of the person in whose hands the minor’s income is included. If fixed deposit held by non-working wife as first account holder from the money of her husband,interest income will be clubbed with that of husband. If FD is held by a parent as first account holder from the money of her adult children then interest income will be the parent’s income. (It holds true for adult child also) If you believe that your total interest income for the year will not fall within overall taxable limits, you should inform the Bank not to deduct TDS on deposits by filling Form 15G or 15H (in-spite of which TDS may be deducted. Govt has asked bank to provide acknowledgement for submission of Form 15H or 15 G) When to show Interest from Fixed Deposit in Income Tax Return There are 2 options to declare the interest, especially when it spans multiple financial years. At the time of maturity of the Fixed Deposit or (technically called as Cash method of accounting) Every year, on the basis of accrual i.e., interest earned but not yet received (techincally called as mercantile (accrual) basis of accounting) If TDS is deducted on Fixed Deposit then as TDS will appear in Form 26AS you MUST to show it in the same year as Income Tax Department will be using the TDS in verifying your income tax return. Our article Viewing Form 26AS on TRACES explains it in detail. If TDS is not deducted then you have a leeway and you can show it at maturity. The disadvantage of showing at maturity is that a higher amount would be deducted at the end. If you have a Fixed Deposit or Recurring deposit spanning multiple financial years, say you invested in Jul 2010 for 3 or 5 years and no TDS has been deducted and you have not shown interest in Income Tax return till now, then wait till maturity to show it in Income Tax Return and then pay the tax. Yes you will have to pay a bigger chunk at the end but it would avoid the confusion.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 veeru answered almost 3 years ago

Interest that is earned on fixed deposits is taxable in the hands of the depositor as per the income slab so a person who earns income between 2 lakh to 5 lakh pays only 10% tax on it while person who earns above 10 lakh pays 30% tax (And education cess and surcharge at the rate of 3%) If the aggregate interest income from fixed deposits that you are likely to earn for all your deposits held in a branch is greater than Rs 10,000 in a financial year, you become liable for TDS . From 1 June 2015 TDS will be levied if the combined interest income from FDs in all branches of a bank exceeds Rs 10,000 in a year. If PAN is not submitted TDS is deducted at the rate of 20%. TDS is also deducted on interest earned or accrued ,but not yet paid, at the end of the financial year. If you have gone for cumulative option in FD which pays interest at maturity still interest would be earned every year and TDS if applicable would be deducted though you DID NOT get the money. A consolidated TDS Certificate in Form 16A, for TDS deducted during a financial year will be issued in the month of April of the following financial year. TDS deducted comes up in your Form 26AS which tied to your PAN number. Details in it should match the Form 16A provided by bank to you.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 CA Sandeep Bohra answered almost 3 years ago

**Interest income from Fixed Deposits with Banks** --Interest income from FD with banks will be taxed under the head" Income from Other Sources". --However, if the assessee is doing business/profession and made FD in his/her business account than the Interest income from such Fixed deposits with banks will be credited to the P&L account and taxed under the "profit and gains from the business and professional head. --Interest income from fixed deposits with banks is liable for TDS if the amount exceeded rs. 10000/-

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Open uri20170510 32134 1c996lj?1494421732 Anil answered almost 3 years ago

Sub-section 2 to section 56 enumerates various types of income which would be chargeable to tax under the residuary headSome examples of certain incomes normally taxed under this head are given below: Interest on saving bank account, bank deposits (fixed, recurring), loans or company deposits, Family pension (received by legal heirs of an employee) : Pension means a regular monthly amount payable by the employer to a person belonging to the family of an employee in the event of his death. Family pension is taxable as income from other sources and a standard deduction of 1/3rd of pension or Rs 15,000 whichever is less is allowed. Dividend : Dividend is the payment made by a company to its shareholders or members out of the profit earned by the company. The company is liable to pay dividend distribution tax at the rate of 12.5% in respect of dividend so declared. So, such dividend is exempt from tax in the hands of the shareholders to avoid the double tax treatment. However deemed dividend from an Indian company or any dividend from foreign company is taxable in hand of shareholder under the head Income from Other Sources Any sum exceeding Rs. 50,000 received without consideration shall be treated as income provided that the sum of money is not received from any relative or on the occasion of marriage of the individual or under a will or inheritance etc. Interest received from IT Dept. on delayed refunds, Income from royalty, Insurance commission, Examiner-ship fees received by a teacher (not from employer), Income from sub-letting of house property by a tenant, Agricultural income from agricultural land situated outside India, Remuneration received by Members of Parliament, Casual receipts and receipts of non-recurring nature, Director’s commission for standing as guarantor to bankers, Winnings from Lotteries, Crossword Puzzles, Horse Races and Card Games, Interest on securities, Income from letting out of machinery, plant or furniture, etc.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Chirag answered almost 3 years ago

Fixed Deposit(FD) is an investment product which allows you to invest a lump of money for a fixed time period and at a fixed rate of interest. Its features are as follows: Interest that is earned on fixed deposits is taxable in the hands of the depositor as per the income slab so a person who earns income between 2 lakh to 5 lakh pays only 10% tax on it while person who earns above 10 lakh pays 30% tax (And education cess and surcharge at the rate of 3%) If the aggregate interest income from fixed deposits that you are likely to earn for all your deposits held in a branch is greater than Rs 10,000 in a financial year, you become liable for TDS . From 1 June 2015 TDS will be levied if the combined interest income from FDs in all branches of a bank exceeds Rs 10,000 in a year. If PAN is not submitted TDS is deducted at the rate of 20%. TDS is also deducted on interest earned or accrued ,but not yet paid, at the end of the financial year. If you have gone for cumulative option in FD which pays interest at maturity still interest would be earned every year and TDS if applicable would be deducted though you DID NOT get the money. A consolidated TDS Certificate in Form 16A, for TDS deducted during a financial year will be issued in the month of April of the following financial year. TDS deducted comes up in your Form 26AS which tied to your PAN number. Details in it should match the Form 16A provided by bank to you. Tax liability is calculated on the first applicant’s name. The second or joint holder has no tax liability. Deposits held by minors,as first account holder, is also subject to TDS. In this case the interest income will be clubbed under the income of the person in whose hands the minor’s income is included. If fixed deposit held by non-working wife as first account holder from the money of her husband,interest income will be clubbed with that of husband. If FD is held by a parent as first account holder from the money of her adult children then interest income will be the parent’s income. (It holds true for adult child also) If you believe that your total interest income for the year will not fall within overall taxable limits, you should inform the Bank not to deduct TDS on deposits by filling Form 15G or 15H (in-spite of which TDS may be deducted. Govt has asked bank to provide acknowledgement for submission of Form 15H or 15 G) When to show Interest from Fixed Deposit in Income Tax Return There are 2 options to declare the interest, especially when it spans multiple financial years. At the time of maturity of the Fixed Deposit or (technically called as Cash method of accounting) Every year, on the basis of accrual i.e., interest earned but not yet received (techincally called as mercantile (accrual) basis of accounting) If TDS is deducted on Fixed Deposit then as TDS will appear in Form 26AS you MUST to show it in the same year as Income Tax Department will be using the TDS in verifying your income tax return. If TDS is not deducted then you have a leeway and you can show it at maturity. The disadvantage of showing at maturity is that a higher amount would be deducted at the end. If you have a Fixed Deposit or Recurring deposit spanning multiple financial years, say you invested in Jul 2010 for 3 or 5 years and no TDS has been deducted and you have not shown interest in Income Tax return till now, then wait till maturity to show it in Income Tax Return and then pay the tax. Yes you will have to pay a bigger chunk at the end but it would avoid the confusion.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 jitendra etikala answered almost 3 years ago

Dear Gunesh, It will comes under "Income from Other sources"

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