ITR Filing 2026: Why NBFC and HFC interest income must be reported separately and what it means for taxpayers

The Income Tax Department has updated the ITR forms for the Assessment Year 2026-27, requiring taxpayers to separately report interest income from non-banking financial companies (NBFCs), housing finance companies (HFCs) and certain corporate instruments. This disclosure falls under Schedule OS, which covers income that does not fall under salary, house property, capital gains or business income.

The revised format includes specific fields for reporting interest income rather than including it under a combined “other income” category. The change aligns reporting with the details available in Form 26AS and the Annual Information Statement (AIS), allowing clearer classification of income and improving data matching during the processing of income tax return (ITR) filing.

What falls under Schedule OS?

Schedule OS specifically covers interest income on fixed and recurring deposits, NBFCs, HFCs, bonds and dividend income, and family pension. It would also cover taxable gifts received within permitted limits, winnings from lotteries, betting, game shows and any other unclassified income, according to Siddharth Maurya, Founder & Managing Director of Vibhavangal Anukulakara Private Limited.

“It is an exhaustive section relating to various categories of income that are taxable and required to be disclosed,” he said.

What changed?

With the revised ITR forms, interest income from NBFCs and HFCs will be reported separately as per Schedule OS (Income from Other Sources) in the ITRs. Maurya said that previously, most taxpayers reported interest income as a single aggregate amount, without having to justify the component parts.

“The new process will require greater accountability from taxpayers, with specific reporting of interest income as reflected in that taxpayer’s AIS and TIS. Tax authorities are looking for reporting accuracy, as taxpayers have reported, and they have proven to have excellent data visibility. Taxpayers will need to replace aggregate reporting with accuracy and precise classification and exact reconciliation of interest income to avoid falling under reporting tax authorities,” he said.

However, there is no change in the treatment of interest income on NBFCs and HFCs, Maurya said. This income is always taxed under the head 'Income from Other Sources', and tax is levied at the applicable tax slab rate of the taxpayer.

What documents should be maintained?

Documentation is considered an important aspect for protection from disputes. Here are the documents that a taxpayer is expected to maintain to ensure accurate reporting:

• Manage interest certificates or statements received from NBFCs and HFCs
• Keep bank statements as supporting records
• Ensure all figures are balanced with AIS, TIS, and Form 26AS
• Preserve loan or deposit agreements for structured investments
• Retain TDS certificates wherever applicable
• Reconcile AIS data with personal financial records before filing

“Most disputes don’t arise due to income concealment but from discrepancies in what is reported by taxpayers and what the tax department has documented,” Maurya said.

Penalty for not disclosing or incorrectly reporting such income

There are certain consequences a taxpayer will have to face if they fail to fully disclose this interest income. “There will be notices issued of income gaps, and people will have to pay interest, or in some cases, the tax department will also impose a penalty under 270A,” the expert said.

In some cases, these penalties also range from 50% to 200% of the due tax. Meanwhile, repeat offenders will be subject to further scrutiny, as the tax department relies almost entirely on data analytics in almost every case.

“Filing a tax return is no longer a self-declaration. It is a data-matching process. Most of the data is already available to the system. Also, small amounts don’t matter belief. Small amounts of interest from NBFCs or HFCs, when not reported, can create a mismatch,” he said.