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How to treat FDs with long duration

Sunder (Manager) (95 Points)

26 July 2010

Hello

What is the correct treatment in the following scenerio:

A person does not have any salary income and is filing to get TDS money back. He has interest and dividend income.
The person has FDs spanning across (2-3 years). Do we need to pro-rate the interest earned
and declare the amount as interest income? OR declare this amount at the time of maturity? Please note

that the person has all the FDs in cumulative mode, so the interest income will be received only at the of FD maturity.

Thank You

Sun

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5 Replies

Ajay Garg (CA FINAL) (101 Points)
Replied 26 July 2010

BANK ALWAYS GIVE A INTEREST AND TDS CERTIFICATE ON ACCRUED INTEREST AS ON 31.03.20XX. SO, PLEASE COLLECT SUCH CERTIFICATE AND RECORD INCOME AS PER CERTIFICATE.

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Manoj BG (Tax Professional and in Service) (1795 Points)
Replied 26 July 2010

Dear All,

As per Sec 145, Income from business or profession and Income from other sources calculated in accordance with the method of accounting employed by the assessee whether mercantile system or cash system. If it is on the cash system, it will be taken as income when actually received and not at the time of credit by bank.

What ajay has said is also absolutely right. bank deducts TDS on the accrues basis and gives the TDS certificates for such accrued period. As a practical measure and to remove hardship, It is better for u to follow mercantile system and show the interest income as per TDS certificates.

Regards,

Manoj

Sunder (Manager) (95 Points)
Replied 29 July 2010

Originally posted by : Manoj B. Gavali
	Dear All, As per Sec 145, Income from business or profession and Income from other sources calculated in accordance with the method of accounting employed by the assessee whether mercantile system or cash system. If it is on the cash system, it will be taken as income when actually received and not at the time of credit by bank. What ajay has said is also absolutely right. bank deducts TDS on the accrues basis and gives the TDS certificates for such accrued period. As a practical measure and to remove hardship, It is better for u to follow mercantile system and show the interest income as per TDS certificates. Regards, Manoj