Interest Income and 26AS

Interest Income and 26AS

Accrual Basis of Accounting

Banks book the FD interest for the year on accrual basis to your account and they are liable to deduct the TDS and deposit that with the government, Even though that interest may not have been paid to you yet. This TDS deducted against your FD shows up in your Form 26AS. What this simply means is – the bank has calculated the TDS amount on the interest income that pertains to the financial year and already deposited on your behalf to the government. While the FD may not have matured yet and no payouts are done to you, TDS on the income has been deducted.

 Therefore, the wise thing to do would be to calculate the interest income that pertains to the financial year, and add it to your Return for the current year (though you may not have received any thing) under Income from Other Sources. Use your Form 26AS to arrive at the interest income for the year. In this way – not only will income that belongs to a particular year will form part of return of that year – your return will be in sync with your Form 26AS and your bank’s details.

26 As is your tax credit statement and it gives details of “TDS” deposited on your behalf. You should check all the TDS payments duly credited to you . IT can be viewed though NSDL and IT departments site and even through Bank’s Online Portal before filing the return of Income.

For example,You have done Fixed Deposit of INR 30lacs for Three Years for 10% interest with all the proceeds i.e. Interest and principal to be received at the time of Maturity. Your Taxable Salary is 10Lacs for same TDS of INR 75000/- is deducted and deposited.

Banks would have given tax credit of INR 3lacs which is accrued but not deposited into your account. Also TDS of INR 30000-/ (10% of INR 3lacs) deposited with government.

If you do reconciliation, with 26AS during filing of Return filing, you will realise that you have to pay additionally INR 60000/- as tax. In case you do not disclose it might invite a notice form IT department.

 

 

Income From Salary

1000000

Income from Other Sources (Interest)

300000

Total Taxable Income

1300000

Tax Payable

165000

Tax Deducted from Salary

75000

Tax Deducted from Interest

30000

Additional Tax Payable

60,000