Interest from FDs is taxable under income from other sources1 min read . Updated: 25 Oct 2020, 07:47 PM IST
- The interest income will be taxable as per the slab rates applicable to you for the respective fiscal year in which the same is offered to tax
- Any TDS deducted on these FDs will be available as credit against the tax payable by you
Two entries are reflecting in tax return for 2018-19 and 2019-2020 in Form 26AS in Part E under SFT-005, as I had made fixed deposits. The TDS has been cut and the income tax has been paid. Please advise.
Where one or more time deposits (other than a time deposit made through renewal of another time deposit) of a person of Rs10 lakh or more in a financial year are made, the financial institution is required to report the transaction. The said information is reflected under Part E of Form 26AS against code Statement of Financial Transaction-005.
The interest income arising from fixed deposits is taxable under the head “income from other sources" according to the method of accounting (i.e. mercantile or cash basis) regularly employed by you. Accordingly, in case historically you have been offering interest income or income from other sources based on accrual or receipt basis, then you could follow the same approach for interest income from these FDs as well. The interest income will be taxable as per the slab rates applicable to you for the respective financial year in which the same is offered to tax. Any TDS deducted on these FDs will be available as credit against the tax payable by you.
The said interest income would need to be duly disclosed in ITRs for the respective year under the relevant schedule. Also, the closing balance in the time deposits would need to be disclosed by you in the AL schedule of the tax return form, in case your net taxable income for the year exceeds ₹50 lakh.
Parizad Sirwalla is partner and head, global mobility services, tax, KPMG in India. Queries and views at email@example.com