Other income calculations

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Sandeep (Querist)
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18 July 2011 Hi,

In order to file the income tax return, I am in the process of calculating the "other Income".

Apart from interest from Fixed deposits and Savings bank interest, I have following investments as well.

1. Long term Infrastructure bond of IFCI (non buy back commulative option).

2. SBI Lower Tier II Bonds (Tenure of 15 years options)

3. Sriram Secured NCD

4. IFCI Tier II bonds

5. Franklin Templeton FMP mutual fund

Can you tell me how do I calculate the accrued income from the above instruments to be included in my total income for this year for the income tax purposes.

Thanks

Sandeep

Sandeep (Querist)
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20 July 2011 Could anyone please respond to this query..

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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09 August 2024 Calculating income from various investments for tax purposes involves understanding how each type of investment generates income and how it should be reported in your tax return. Here’s a guide to calculating and reporting the accrued income from the investments you’ve listed:

### 1. **Long Term Infrastructure Bonds of IFCI (Non-Buy Back Cumulative Option)**

**Income Calculation:**
- **Cumulative Option:** In cumulative bonds, interest accrues and is compounded. The interest is not paid periodically but is added to the principal, and you receive the amount at maturity.
- **Accrued Income Calculation:** To calculate accrued income for the current year, you need to estimate the annual interest component based on the compounded value. If the bonds are held till maturity, the interest will be taxed as capital gains if they are sold. For now, report the accrued interest based on the cumulative nature of the bonds as part of other income.

**Tax Treatment:**
- **Interest Income:** Taxed under “Income from Other Sources.” The cumulative interest will be added to your income and taxed as per the applicable slab rates.

### 2. **SBI Lower Tier II Bonds (Tenure of 15 Years)**

**Income Calculation:**
- **Interest Income:** These bonds typically pay interest annually or semi-annually.
- **Accrued Income Calculation:** For bonds that pay periodic interest, you need to account for the interest received during the financial year. If you haven’t received the interest yet, calculate the proportionate interest that would have accrued during the year and include that in your income.

**Tax Treatment:**
- **Interest Income:** Taxed under “Income from Other Sources.” Report the actual interest received or accrued during the financial year.

### 3. **Sriram Secured NCD (Non-Convertible Debenture)**

**Income Calculation:**
- **Interest Income:** Similar to bonds, NCDs typically pay interest at regular intervals.
- **Accrued Income Calculation:** Calculate the interest received or accrued during the year. For NCDs with periodic payments, include the interest that has been paid or accrued in your income.

**Tax Treatment:**
- **Interest Income:** Taxed under “Income from Other Sources.” Report the interest as part of your total income.

### 4. **IFCI Tier II Bonds**

**Income Calculation:**
- **Interest Income:** Like other bonds, interest on Tier II bonds is usually paid periodically.
- **Accrued Income Calculation:** Determine the interest received or accrued during the financial year. If it is cumulative, calculate the proportionate interest accrued.

**Tax Treatment:**
- **Interest Income:** Taxed under “Income from Other Sources.” Report the interest income accordingly.

### 5. **Franklin Templeton FMP Mutual Fund**

**Income Calculation:**
- **Mutual Fund Income:** Fixed Maturity Plans (FMPs) usually distribute income at maturity or periodically.
- **Accrued Income Calculation:** For FMPs, the interest is often paid on maturity or at scheduled intervals. If the FMP pays interest periodically, calculate the amount received or accrued during the year. If it is cumulative, calculate the proportionate interest accrued for the year.

**Tax Treatment:**
- **Income:** Taxed under “Income from Other Sources.” Report the actual income received or accrued from the FMP.

### General Steps for Reporting

1. **Calculate Accrued Income:** For each investment, determine the interest accrued during the financial year. If the interest is not yet received, estimate it based on the terms of the investment.

2. **Include in Total Income:** Report the accrued or received interest from these investments under “Income from Other Sources” in your Income Tax Return.

3. **Documentation:** Maintain proper documentation and calculations to substantiate the reported interest income in case of any queries from the tax authorities.

4. **Tax Deductibility:** Ensure you account for any tax benefits or exemptions available for specific investments. For instance, some infrastructure bonds may offer tax benefits under Section 80CCF (if applicable).

### Conclusion

Accrued income from various instruments should be reported in your Income Tax Return based on the type of income and how it is paid or accrued. Interest from bonds, NCDs, and mutual funds is generally taxed under “Income from Other Sources,” while cumulative bonds may require estimation of accrued interest.

For precise calculations, refer to the terms of each investment and consider consulting with a tax professional to ensure accurate reporting and compliance with tax regulations.

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