Income tax on fixed deposit

Income from bank interest is taxable, it means you have to add it while calculate gross total income either tds has deducted from it or not. And then after taking deduction of chapter VI(popularly known as sec.80 deductions), calculate tax and if tds made earlier then deduct it from tax liability i.e. Your net tax liability actually you have to pay. Here i m ignoring advance tax and tax credit to make concept easy. Remember one thing more that if tds has made from any income then you have to add that income as gross income(i.e. Before tds). And yes if your total income is below basic exemption limit and not tds made from any income than u've to do nothing otherwise ur tds will be refunded to u? Tds on fd is deducted @ 10%(and if u have no pan then @ 20%) only if ur yearly fd interest exceed Rs.10,000 per year,per assessee,PER BRANCH. And fd interest taxability has no relevence with salary or other head income or loss.

Suppose for a assessee, the FD interest is Rs. 11000 in a year at a branch. That is the TAX will be on Rs. 11000 or on Rs. 1000 (Rs. 11000 -Rs. 10000 = Rs. 1000)?

 

Even If the FD interest is below Rs.10,000 per year,per assessee,PER BRANCH, then the assessee wil have to pay the tax for that. Is not it?

Dear B

It is very simple.  Mr Deepak Parsai has already explained. I will try to make it more simple:-

1) The interest on fixed deposits [ whether Bank or a company ] is covered in IT Rules as OTHER INCOME.

2) This income has to be added to Salary income and all other incomes to arrive at gross income.

3) After subtracting the applicable deductions from the gross income, the tax has to be calculated on the net taxable income.

THE TAX IS ON THE INTEREST, NOT ON THE PRINCIPAL. 

AND THE TDS IS THE WITH-HOLDING TAX. THE ACTUAL TAX HAS TO BE CALCULATED AND THEN IF TDS WAS MORE THAN TAX THEN ASSESSEE WILL GET REFUND. OTHERWISE BALANCE AMOUNT HAS TO BE PAID AS TAX

Hi

 

I did not answer my following queries :

 

Dear B,

1) The entire interest amount (i.e.Rs.11,000/- and NOT Rs.1000/-) is liable for tax.

2) Even if the interest amount is less than Rs.10,000/-,it has to be added to the total income and tax paid.

3) The limit of Rs.10,000/- is purely for the purpose of TDS,i.e.,tax deducted at source by the bank.

Ok, let me clear again, tds u/s 194A is deducted if interest above 10000, and if it is then it will be deducted on full amount. E.g. If interest is 11000 then tds @ 10% on 11000 to be deducted by bank. Secondly, still u have to add this interest in gross total income and calculate tax. Chahe interest Rs.100 ho ya Rs.100000, chahe us par tds kata ho ya nahi, use GTI me add karo aur tax banta hai to pay karo, lekin tds hua hai to is tax me se utna amount kam kar k baki pay karo. I hope now you have got ur answer.