The interest certificate received from the bank for Fixed deposits indicates interest in two categories for the Financial Year 2023-24. Interest credited to the savings account during F. Y. 2023-24 and Accrued interest on FD but not credited to savings account since FD is not matured in a subject financial year. Till last year F. Y. 2022-23, there was no accrued interest. Only interest credited to the savings account was shown as income while filling out the ITR. From F. Y. 2023-24, accrued interest appears in the interest certificate since a few FDs did not mature during F. Y. 2023-24. I want to file an ITR for F. Y. 2023-24. Do we have to show both interest categories while filing income tax returns, or is only interest credited to the savings account?
Answer: As per the provisions of income tax laws, in respect of head “Profits and gains of business or profession” and “Income from other Source”, a taxpayer has the option to declare his income in respect of a particular source of income either on receipt basis or on an accrual basis. This applies to interest income as well. Whichever method one opts for declaring the income, the same has to be followed consistently year after year.
From your question, it appears that, in the past, you have been offering the interest income in the year in which the same was credited to your savings bank account. So you have followed the receipt basis for providing your income for tax in the past, which you are supposed to follow this year as well. So, declare the interest credited in your savings bank account for the year while filing your ITR.
Please note that your bank would deduct tax on interest on an accrual basis, and there may be some mismatch between the interest income offered by you for the year and the interest on which tax is deducted by the bank during the year. For those who have large-value fixed deposits with banks, it is advisable to offer the interest income from such bank fixed deposits on an accrual basis so that there is no sudden spurt in your income in the year in which the fixed deposit matures, as well as no need to carry forward the amount of TDS from one year to another year.
Balwant Jain is a tax and investment expert and can be reached at jainbalwant@gmail.com and on @jainbalwant on Twitter.
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Published: 11 May 2024, 01:08 PM IST