A employee has deposited Rs. 100000 in Bank Term Deposit Scheme - Tax saver scheme (subject to CBDT Notifi. No. 203/2006 dt 28.07.2006)which is locked for 5 years on 20.09.2006. It gets matured on 20.09.2011.
For the asst. year 2010-11 while computing his tax can the above deposit be claimed as dedcution under sec. 80C or only tax saver deposits made in the current financial year 2009-2010 can only be claimed as deduction u/s S. 80C?
10 February 2010
Deposit made in the financial year 2009-10 can only be claimed u/s 80C in assessment year 2010-11 because section has used the words "deposited in the previous year" in the preamble.
10 February 2010
Agreed. Also, for this amount deduction has already been taken in the year of deposit so no further deduction is allowed. You can deposit it again after maturity and then u can claim the deduction for the current year.
10 February 2010
Interest on bank deposit is to offered for taxation under the head"Income from other sources". Taxation law provides that income is to be offered for taxation either at "cash system" or "mercantile system". Accordingly assessee has the option to choose either of the above two and the method so choosen should be regularly followed. Thus if the assessee chooses cash system, entire interest income should be offered in the year of maturity of the deposit. On the other hand if mercantile system is adopted, yearly interest is to be offered in that particular year itself.
11 February 2010
Which of the following will benefit the assessee - salary income being Rs. 6 lacs?
Submitting form 15G with the Bank for not deducting tax (TDS)for the interest exceeding Rs. 10000 and filing the return with ITO as per form 16 details and in addition to it offering under the head Income form other souces the interest income on every year and then computing tax .
or
Not to submit the form 15G, (so TDS will be deducted by bank)and not offering as interest income every year in the return filed with ITO(just filing return with ITO by computing tax as per Form 16 alone)?
11 February 2010
TDS Rate on Interest from Bank is 10%. and in case, of salary, TDS is deducted according to the prevailing slab rates after calculating your tax liability including the Other Income disclosed to the employer.
In case salary is 6 Laks, certainly you will fall in the slab of 20% or more. So in that case, if bank dedcuts the interest then it will be at the lower rate of 10%. However, while filing the return you have to deposit the Self Assessment tax. This option increases your monthly Cash in salary.
On overall, you have to pay tax and TDS deduction by Bank will just defer the payment by some time.
12 February 2010
In the above case, the employee being a taxpayer(and hence not eligible to give declaration in Form 15G) will the interest income be taxed both
by way of TDS at 10% by the bank
and also
by way of Income under other heads at 30% slab rate while filing return of income?
12 February 2010
While filing return, the interst will be included in Income from other sources and tax will be calculated as per the slabs. Then the amount of tax paybale will be reduced by the amount of TDS deducted by the bank.
It will taxed only once however, the tax rate will be according to the slab rate.
15 February 2010
Hence the assessee is not eligible to give form 15G to the bank and hence the TDS deducted can be claimed back while he files his return by offering his interest income as income from other sources and paying tax at the eliglbe slab rates.
Many thanks for answering and clarifying all my questions.
CAclubindia
