Inclusion of Interest Income in the Return of Income filed by Persons liable to Pay Tax
March, 25th 2016
The income tax department on Wednesday asked individual taxpayers to declare their income earned from interest on bank deposits in their tax returns in a bid to check tax evasion.
It has also asked taxpayers to file revised income-tax returns for the past two years to reflect this interest income.
“Central Board of Direct Taxes would like to inform the persons earning interest income that interest credited/received on deposits is taxable unless exempt under Section 10 of the Income-Tax Act,” it said.
“Such interest income should be shown in the return of income even in cases where Form 15G/15H has been filed if the earning is not exempt under Section 10 of the Income-Tax Act and the total income of the person exceeds the maximum amount not chargeable to tax,” it added.
Section 10 of the Income-Tax Act spells out the type of income exempted from the calculation of total income for tax purposes.
Form 15G/Form 15H are self-declaration forms filled by depositors and handed over to banks to ensure that tax is not deducted at source by the bank on the interest accrued on a bank deposit.
In the statement, the tax department warned evaders that it gets all information about an individual’s deposits from the financial institutions.
“Information regarding interest earned by individuals and business entities on term deposits is filed with the income tax department by banks, including cooperative banks, and other financial institutions and state treasuries,” the tax department said.
“Form 26AS reflects only those payments on which tax has been deducted and it can be viewed by the individual taxpayer. The information about interest payments without deduction of tax is also filed by the payer with the department,” it added.
The department has asked taxpayers to correct details of interest received or credited and accordingly file or revise tax returns for assessment year 2014-15 and 2015-16.
They have also been asked to pay the tax before 31 March to avoid any levy of penalty.
“It is the law and taxpayers are supposed to declare their interest income. The tax department’s statement is a warning to taxpayers that we know about your deposits with banks. So, please come forward and declare your interest income yourself,” said Amarpal Chadha, tax partner at audit and consultancy firm EY.