Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
Popular Search: TDS :: cpt :: due date for vat payment :: Central Excise rule to resale the machines to a new company :: articles on VAT and GST in India :: ARTICLES ON INPUT TAX CREDIT IN VAT :: list of goods taxed at 4% :: VAT RATES :: form 3cd :: empanelment :: ACCOUNTING STANDARDS :: TAX RATES - GOODS TAXABLE @ 4% :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: ACCOUNTING STANDARD :: VAT Audit
General »
 Number of companies paying tax over Rs 100 crore declines in 2013-14
 Tax and the dilemma of the self-employed
 Banks warn share tax hike threatens Paris' post-Brexit appeal
 PMC may decide on property tax rebate for IT firms this week
 I-T Dept is giving out certificates of appreciation. Have you received yours?
 Government works on ironing out benefits refund mechanism for exportersa
  Tax officials are using an IDS provision to question transactions beyond six-year-limit
 Tax-free bonds rally like midcap funds
 Senior citizens do not have to pay advance tax on salary and interest income
 GST: Audit commissioners to get adjudication powers
 Interest on NRE rupee account can be exempt from tax under FEMA

How to account for interest earnings from savings account & fixed deposits
July, 30th 2016

Though it has been proven time and time again that the rate of interest on fixed deposits or savings accounts cannot beat inflation, the fact remains that a majority of the salaried population falls back on this option. No doubt the investments in securities and mutual funds can produce higher returns, but FDs and savings accounts offer security of capital and ease in parking excess funds, while waiting for the right time to invest in alternatives. FDs are especially popular amongst retired population as senior citizens above the age of 60 years can earn a slightly higher rate of interest. Interest earned on FDs and savings accounts is taxable as “income from other sources” and is required to be reported in the annual tax return.

Interest on savings accounts: The tax deduction at source (TDS) provisions do not apply in case of interest on savings accounts irrespective of the amount of interest earned. Further, the Income tax Act, 1961 (Act) provides for a deduction under section 80TTA up to Rs 10,000 from interest earned from savings account (including cooperative banks and post office). This is a cumulative deduction available from the total interest income earned from all the savings accounts by an individual. This deduction is applicable only in respect of interest from savings accounts and not to interest on FDs.

Interest on FDs: Interest on FDs earned in excess of Rs 10,000 is subject to TDS at the rate of 10%. If the recipient does not furnish the “Permanent Account Number” (PAN), TDS at a higher rate of 20% applies. However, in case of a resident if the tax payable on the total income including the interest is “Nil”, TDS provisions do not apply on such interest income. The recipient of interest, can make a declaration in Form 15G to the bank in order to avail waiver form the TDS provisions on such interest income (Form 15H applies in case of senior citizen above 60 years of age). A separate declaration needs to be made for every year and should be made at the beginning of the year.

Also read: First time income tax return filers: 10 basics they must know

Interest on accounts for Non Resident Indians: Interest from Non-Resident (External) account is fully exempt from tax in India (subject to fulfilment of conditions) whereas interest on Non-Resident (Ordinary) account is taxable and subject to TDS at the rate of 30%.

Clubbing provisions: Sometimes parents make deposits in the name of their minor child. Interest on such deposits is required to be clubbed in the hands of the parent having greater income. In that case, the parent can claim an exemption upto Rs 1,500 under section 10(32) of the Act.

Tax rate: Interest income is taxable at the normal rate of tax. India follows a progressive slab rate structure as per which, tax on income of Rs 10,00,000 works out to Rs 125,000 and income above Rs 10,00,000 is taxable in the 30% bracket. In addition to that a 12% surcharge is applicable if the total income exceeds Rs 1,00,00,000 and also a secondary and higher education cess of 3% (on tax and surcharge) is applicable in all the cases. An important point here is that the tax is required to be calculated on the gross interest income i.e. net interest income received as increased by the TDS deducted. The TDS amount can be claimed as a credit against the total tax on total income.

Watch: Simple tips to file income tax return

Tracking of interest and TDS: To track the exact amount of interest income and TDS thereon, Form 26AS can be referred which is an annual tax statement that displays the entire information on income paid, TDS deducted thereon, taxes paid by way of advance tax, self-assessment tax and also income-tax refund and interest received thereon. Form 26AS does not reflect savings account interest since TDS does not apply to it. Form 26AS is an important information tool relied on by taxpayers as well as tax authorities to track income and tax details. It is highly recommended to refer to and preserve Form 26AS before preparing tax return and address any discrepancies to avoid any future scrutiny by the Tax Authorities. Further a certificate in Form 16A is issued by the deductor of tax mentioning details such as interest paid and TDS thereon which should be kept on record.

Filing the tax return and disclosures: It is important to select the right ITR form for filing the tax return. The gross interest on savings accounts and FDs needs to be reported in “Schedule OS” of the respective ITR form and the deduction under section 80TTA needs to be reported in “Schedule VIA” which covers deduction under chapter VI-A of the Act. Separately, one should not forget to report TDS deducted on interest in “Schedule TDS” alongwith the details of PAN and Tax Deduction Number (TAN) of the deductor. Further “Schedule PARTB – TI – TTI” also requires details of all the savings and current bank accounts held during the year to be reported (other than dormant accounts). In addition to that, the individuals having a total income exceeding Rs 50,00,000 in the tax year are required to report deposits with banks in “Schedule AL”. Lastly, interest exempt from NRE account should be reported in the “Schedule EI”.

Non-disclosure of interest income can be easily tracked by the Tax department by accessing Form 26AS and one should report taxable income appropriately and pay tax thereon. The tax return for Tax Year 2015-16 is due on 31 July 2016 which is a Sunday so if you have not filed your tax return, do it today!

Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Website Ranking Website Ranking Company Website Positioning Alexa Ranking Website Promotion Website top 10 ranking website top 10 promotion search engine result promotion Strategic Internet Marketing Website Optimization Website Ranking Factors

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions