25 July 2012
Suppose an Individual has made a FD of Rs.50,000 for a period of 5 years @ 10% interest p.a., so the interest accrued will be Rs.5,000 annually and at the time of maturity, bank will pay interest of Rs.25,000. Now, my query is:
1. From the point of view of Bank: At what time the bank should deduct TDS on interest- (a). at the time of maturity, or (b). at the time when the interest crosses the ceiling of Rs.10,000 any time during the % year period.
2. From the point of view of individual: In what manner will he have to show the interest income in his return- (a). on accrued basis Rs.5,000 annually, but in that case if the bank deducts TDS during the 5 year period, he might face some difficulty and have to make some adjustments, because the bank will show interest of more than Rs.10,000 in the Form 16A, and he is showing only Rs.5,000 annually. (b). show interest only when the bank issues a Form 16A in respect of the TDS deducted, whether at the time of maturity or in between the 5 year period.
25 July 2012
Bank will deduct TDS only if interest payable in a year exceeds Rs. 10000 pa.AS in your case interest is Rs.5000 only no TDS is deductible. You have to show interest income on accrual basis i.e. Rs. 5000 p.a. assuming total interest from the branch concerned is less then Rs.10000 p.a.
25 July 2012
OK...so does that mean that the bank will not deduct TDS even at the time of maturity, when it will pay the whole interest of Rs.25,000??
And, if i show interest income on accrual basis @ Rs.5,000 per year, what will happen if at maturity the bank deducts TDS on interest of Rs.25,000. How will i show it in my return, as for claiming the tax credit of that TDS, i will have to show the whole interest amount again?
25 July 2012
Bank will follow the accrual system of accounting only. once the interest for the year credited in your account that will be added to your FD amount and also TDS threshold limit will be compared with the yearly amount only, not to adding last year amounts and all,
so no need to worry about the 5th year bank will deduct the total TDS, but your accounting can be down whether accrual or cash basis. means you can show the interest every year Rs.5000 also or can show the Rs.25000 on 5th year also.
CAclubindia
