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Interest

RAJ KUMAR (FINANCE MANAGER) (1393 Points)

24 April 2011

HELLO FRIENDS, IF THE ACCOUNT IS JOINT ON TWO PERSONS AND BOTH ARE SEPERATE PAN HOLDERS AND FILES THEIR RETURNS.

WHETHER THE INTEREST RECEIVED IS TO BE SHOWN IN THE RETURN OF FIRST HOLDER OR 50% EACH.

PLS. HELP ME.

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9 Replies

U S Sharma (glidor@gmail.com) (21063 Points)
Replied 24 April 2011

In joint accounts, the 1st holder is the owner of account and all the interest credit, charge debit is accounted to 1st holder only,

1st holder is liable to add the interest income to his income, and discharge tax liability, if any.

Joint holder is only co-pancer for the account, and its done to safeguard the banking in absence of 1st holder.

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Pradip Narsingani (Income Tax & GST Consultant/ CA-Final) (572 Points)
Replied 24 April 2011

Thnks U s sharma...

CA Ishaan (Chartered Accountant) (453 Points)
Replied 24 April 2011

Hello

I would like to disagree, respectfully though

There is no straightforward answer to this question. I have researched at length and found these points relevant :

(1) By virtue of Circular No. 256 [F. No. 275/17/79-IT(b)] , in case of joint accounts, in the absence of specific information about the beneficial ownership of deposits, payer may aggregate the interest on joit account, with interest on deposit in that individual's account, who has higher interest income and deduct tax accordingly. The joint holders may file affidavits and have the method of TDS deduction changed, but the AO still retains the power to determine beneficial ownership and deduct tax accordingly

(2) Interest for taxation purpose can be split according to the source of the deposit. If the deposit comes solely from one deposit holder, the interest will be assessable in that holders' hands

Thanks and Regards

U S Sharma (glidor@gmail.com) (21063 Points)
Replied 24 April 2011

Originally posted by : Ishaan
	Hello I would like to disagree, respectfully though There is no straightforward answer to this question. I have researched at length and found these points relevant : (1) By virtue of Circular No. 256 [F. No. 275/17/79-IT(b)] , in case of joint accounts, in the absence of specific information about the beneficial ownership of deposits, payer may aggregate the interest on joit account, with interest on deposit in that individual's account, who has higher interest income and deduct tax accordingly. The joint holders may file affidavits and have the method of TDS deduction changed, but the AO still retains the power to determine beneficial ownership and deduct tax accordingly (2) Interest for taxation purpose can be split according to the source of the deposit. If the deposit comes solely from one deposit holder, the interest will be assessable in that holders' hands Thanks and Regards

8. The sole / first deposit holder will be usually regarded as the beneficial owner of the fixed deposit and considered as the payee of the purposes of income tax deduction at some source (TDS) from the interest on such deposit. It is essential for the first holder in joint account to provide PAN details to the bank to avoid deduction of tax at higher rates. In case the first account holder is not the beneficial owner / sole beneficiary of such interest then all the account holders need to give their respective PAN numbers and file a declaration in writing giving details of sharing proportion of such interest income.

9 a. TDS, when due and applicable will be deducted in accordance with the provisions of the Income Tax Act, 1961 and the Rules thereunder as in force. In the case of 'resident' payee, TDS at appropriate rates will be deducted where the aggregate of the interest on such deposit(s) credited, during a financial year exceeds the maximum amount prescribed by the Income Tax Act, 1961. Such TDS shall be recovered from saving/current/demand deposit a/c(s). In cases where the deposit holder holds only Fixed Deposits and no Demand Deposit account with HSBC or has not designated an account from where the TDS amount is to be deducted, the Bank would recover TDS amounts from the maturity proceeds or from the encashment proceeds (in case of premature encashment ) of the deposit.

https://www.hsbc.co.in/1/2/personal/bank-accounts/account-rules

KIYOSH (TAX CONSULTANT) (332 Points)
Replied 24 April 2011

I agree with U S Sharma

Regards,

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CA Ishaan (Chartered Accountant) (453 Points)
Replied 25 April 2011

Hello,

Circulars, statutes, judicial pronouncements et al have over-riding effect over individual bank policies. It may be HSBC's policy or other banks may be following that policy. But that cannot and will not extinguish the options afforded by law/ Revenue to the assessee.

If the assessee wants the interest to be split in two accounts according to the options set out in the above circular, it is not open to HSBC or any other bank to contest the claim. The AO can however dispute the beneficial ownership or on basis of source of such deposits.

Again, the payer may have any policy, the circular supresedes that policy.

Thanks and Regards

CA Ishaan (Chartered Accountant) (453 Points)
Replied 25 April 2011

If you refer to point 8 of HSBC rules, it is in effect saying the same thing as I am

Thanks and Regards

mahesh (Will soon be a CA !) (168 Points)
Replied 25 April 2011

Rightly said by Ishaan. Interest on savings account in case of joint holders, is to be split proportionately with regard to amounts contributed for earning such interest. However as far as the banks are concerned, they will deduct tax in the name of first holder in general.

Quantum of income to be shared is the responsibilty of the account holder and not of the banker.His duty is deduct tax , which he does.

U S Sharma (glidor@gmail.com) (21063 Points)
Replied 25 April 2011

Originally posted by : Ishaan
	Hello, Circulars, statutes, judicial pronouncements et al have over-riding effect over individual bank policies. It may be HSBC's policy or other banks may be following that policy. But that cannot and will not extinguish the options afforded by law/ Revenue to the assessee. If the assessee wants the interest to be split in two accounts according to the options set out in the above circular, it is not open to HSBC or any other bank to contest the claim. The AO can however dispute the beneficial ownership or on basis of source of such deposits. Again, the payer may have any policy, the circular supresedes that policy. Thanks and Regards