Treatment of interest earned on bank rd a/c - income or not?
pundalika achyuta bhat
(Querist) 25 January 2014
This query is : Resolved
Mr. A’s RD A/c with a Bank matures on 15-04-2014. Interest earned on RD A/c is free of TDS (that is no TDS is is deducted by the Bank). Now what about the treatment of interest amount? Whether interest should be treated as income if:
(I) int. earned is below Rs.10, 000
(ii) int. earned is above Rs.10, 000
With regards,
Pundalika Bhat.
ajay sethi
(Expert) 25 January 2014
.TDS applies if interest from all your FDs in a bank exceeds Rs 10,000 a year.
But this does not imply that FD interest below Rs 10,000 is tax free. You need to pay tax on it by declaring the interest in ITR form while filing income tax returns and pay the tax as self assessment tax.
prabhakar singh
(Expert) 25 January 2014
Gone are the days when interest earned up to
Rs.10,000 was non taxable.
As on date each penny of interest earned on any account barring that of an SB a/c would be clubbed in the the total income for the purpose of calculation of tax.
TDS would not be deducted if PAN is provided to the bank.
Rajendra K Goyal
(Expert) 25 January 2014
Interest earned on RD account is taxable and TDS is to be deducted on it. RD is considered as Fixed Deposit and not as a saving account.
If the interest earned under FD exceeds Rs. 10,000 in a financial year, it would be eligible for tax deduction at source (TDS) at 10 per cent plus 3 per cent education cess, therefore a total 10.3 per cent of the interest earned.
It seems that the interest earned on RD per year was less than 10,000/- hence no tax was deducted.
You have to consider your total interest in income while calculating tax liability.
Guest
(Expert) 25 January 2014
Well advised.
malipeddi jaggarao
(Expert) 26 January 2014
I differ with Mr.Rajendra. TDS deduction is exempted for RD Accounts.
T. Kalaiselvan, Advocate
(Expert) 26 January 2014
I also have the opinion of Mr. Rao that the RD is exempted from TDS, let me check the latest ruling on it before confirming it.
R.V.RAO
(Expert) 22 February 2014
no tds on RD a/c.by bank.yes.
but int.on RD is not exempt from tax.yes.
bank gives a statement of every year accrued int.which the assessee offers in tax returns as income,subject to tax.
if you did not collect such annual accrued int.details from bank ,what you need to do now is
take total maturity amount and then deduct the total of your monthly RD contributions(PRINCIPAL AMOUNT only).
the diff.is interest accrued to you over the entire duration of RD period.
this amount you can now offer as income taxable .this will of course push up tax slab.
DG Posts letter No. 97-7/89-SB dt 20.11.1990 states that the CBDT have clarified that the bonus payable under POMIS shall be treated as interest and will be taxable. Therefore, the same cannot be treated as capital gains. In the case of recurring deposit, the capital amount out of the maturity proceeds would be tax-free whereas the accretion to capital will be treated as interest and taxed accordingly.
source:www.thetribuneindia.com
R.V.RAO
(Expert) 22 February 2014
no tds on RD a/c.by bank.
but int.on RD is not exempt from tax.
bank gives a statement of every year accrued int.which the assessee offers in tax returns as income,subject to tax.
if you did not collect such annual accrued int.details from bank ,what you need to do now is
take total maturity amount and then deduct the total of your monthly RD contributions(PRINCIPAL AMOUNT only).
the diff.is interest accrued to you over the entire duration of RD period.
this amount you can now offer as income taxable .this will of course push up tax slab.
DG Posts letter No. 97-7/89-SB dt 20.11.1990 states that the CBDT have clarified that the bonus payable under POMIS shall be treated as interest and will be taxable. Therefore, the same cannot be treated as capital gains. In the case of recurring deposit, the capital amount out of the maturity proceeds would be tax-free whereas the accretion to capital will be treated as interest and taxed accordingly.
source:www.thetribuneindia.com
