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Interest Income – Tax Treatment
- There are many cases where you receive interest income viz., Interest from saving bank account and fixed deposits and income from post office saving deposit in the form of interest. 2.Interest on fixed deposit is credited to the bank account and in many other cases it is added to deposit amount i.e, it is reinvested. If interest income is reinvested in deposit and will be paid at the time of maturity then it would be better to show it as income from other sources in the year itself and tax can be paid on that so that it would not be again taxable in the year of maturity.
3. TDS on interest income ? :
Savings account :
Banks don’t deduct tax from interest income earned on savings account.
Fixed deposit :
In case of fixed deposit , starting from 1st April 2015, the bank will sum up interest you earn from all the fixed deposits held by you in its branches ,if this amount exceeds Rs 10,000, TDS will be deducted on it @ 10%. If the bank does not have your PAN details, TDS will be deducted @ 20%.5. The bank deducts TDS on interest income each year, even when it is not paid and is reinvested. For recurring deposit also the treatment is same as fixed deposit. But this will be effective from 1st June 2015.
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4.Form 15G & 15H? :
If your total income is less than the minimum amount which is subject to tax i.e, basis exemption limit, you can submit Form15G & 15H. These forms are a declaration that your total income is less than the taxable amount and therefore no TDS should be deducted on your interest. Form 15H is for senior citizens, those who are 60 years or older; while Form 15G is for everybody else.
Conditions to be met for filing this forms :
A..Form G : 1.You should be an individual or HUF. 2.You must be a Resident Indian 3.You should be less than 60 yearsold 4.Tax calculated on your Total Income isnil 5.The total interest income for the year is less than the basic exemption limit of that year. B.Form 15H: 1.You must be an individual 2.You should be a Resident Indian 3.You are 60 years old or will be 60years old during the year for which you are submitting the form 4.Tax calculated on your Total Income is nil
Deduction under section 80TTA?
This deduction is available on interest from savings bank account and/or post office savings account. The deduction is the lower of interest earned or Rs 10,000. Do remember that the deduction is not applicable for interest from time deposits or interest income from Fixed deposits or Recurring Deposits.
