Reminder from tax department to pay tax on interest income, revise returns if required

In last year’s tax returns a disclosure in tax returns was added for bank accounts held by a tax payer.

It seems the income tax department has done its work related to this information. It has recently asked tax payers to include entire interest income in their tax return and pay tax on it. The release also said that you must revise your revise your tax return if you did not include interest income.

 

Important points regarding tax on interest income

  • Include all interest incomes in your tax return: All types of interest income should be included in your tax return.

All of these interest incomes are taxable –

  • Interest income from a savings account with banks, co-operative banks, post offices
  • Interest income from a fixed deposit
  • Interest income a recurring deposit
  • Interest income from corporate bonds
  • Interest income from government bonds (unless specifically notified by the government)
  • Interest income from capital gains bonds
  • Interest income from post office savings deposit schemes
  • Interest income from post office monthly schemes
  • Interest income on NSCs
  • Interest income from Kisan Vikas Patras.

 

  • Form 26AS includes only that interest income on which TDS is deducted: A lot of tax payers include interest income which appears in their Form 26AS. This is the interest income on which TDS has been deducted. Since no TDS is deducted from a savings bank account, such interest income is not included. However, interest from a savings account is taxable and must be included in your tax return.

 

  • Deduction under section 80TTA: Are you unsure about how to claim this deduction – read here in detail. A lot of taxpayers make the mistake of assuming this deduction is available on all types of interest. And sometimes they completely miss out on including interest in their tax returns. (More helpful reading here).

 

  • Government has information of interest paid by payer without TDS deduction: The circular from the income tax department mentions that the government has details from payers of interest paid by them without deducting TDS. So make no mistakes and remember to include these in your income tax returns.

 

  • Where a Form 15G and Form 15H is filed but total income of tax payer exceeds Rs 2,50,000: Sometimes you may have filed a Form 15G and Form 15H but at the end of the year realised that your total income is more than the minimum exempt income of Rs 2,50,000. In such a case, you must include interest for which you gave Form 15G/Form15H. Even though no TDS is deducted, such income is fully taxable.

 

(Find out if you are eligible to fill Form 15G/Form 15H here. Instructions to fill Form 15G are here).

 

Pay tax on interest income

 

What should you do to comply with the circular  

  • File your income tax return of income for Assessment Year 2014-15 (if not filed already) by 31st March 2016. Assessment year 2014-15 relates to financial year 2013-14. Minimum income exempt from tax for this year is Rs 2,00,000.
  • Revise your income tax return of income for assessment year 2014-15/2015-16 if the return already filed does not include taxable interest income. Minimum income exempt from tax for these years is Rs 2,50,000.
  • File income tax return of income for assessment year 2015-16, if not filed so far and include taxable interest income if any. This return must be filed by 31st March 2016 to avoid penalty of Rs 5,000 under section 271F.

 

If you are unsure whether you should include an interest income you have earned or need help with revising your income tax return to include this income, write to us support@cleartax.in and we’ll be happy to assist you.

 

As per press release of Income Tax Department dated 23rd March 2016.

2 Responses to Reminder from tax department to pay tax on interest income, revise returns if required

  1. prajik March 28, 2016 at 2:25 pm #

    How can I calculate the tax on interest for the FY14-15. As it had to be paid before 31st of March 2015, is there any penalty or interest to be calculated.

    • cleartax-team March 30, 2016 at 10:03 am #

      Hi Prajik, please include interest income in your total income for FY 2014-15. Now calculate total tax payable on the such new total income. Subtract dues which have already been paid. Deposit any remaining tax due alongwith penal interest under section 234B and 234C. If you need help with recalculation, drop us an email support@cleartax.in and we’ll help you out.