16 June 2008
Under the Income Tax Act Individuals can compute their taxes either on cash basis or on accrual basis.
Still why is it that many people get into the process of computation of accrued interest on their NSC certificates held and take that into account while computing their yearly taxes?
They take accrued interest on NSC under the head - Income from other sources and show the same as deduction u/s 80C.
Is not it simpler to only show the interest earned during the year of maturity of NSC as income from other sources in the year of maturity of NSC?
16 June 2008
It is always better to mainatain accounts on accrual basis, as such accouting has the benefit of having update information. It may be simpler for the individuals to adopt cash basis of accounting. However this may not be true for high net worth individuals and owners/directors of firms and companies.
such indviduals have to prepare a balance sheet along with their computation of income/capital account etc.Under such circumstances actual value of an asset/investment reflecting in their balance sheet will have many benefits in terms of assessing thier financial standing calculation of net worth etc.
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