- “I do not want to declare interest as it will add to my tax liability.”
- “ I believed that interest on saving bank account is tax free “
- “My bank has not deducted TDS on this interest. I am not supposed to report this part of interest”
Wondering which category you belong to?
Well, many tax payers ignore interest income while filing their returns either due to misconceptions relating to tax provisions or willfully to avoid tax
To note, in a recent press release on March 23, 2016, the Central Board of Direct Taxes has asked tax payers to re-file and rectify their returns for FY 2013-14 onwards in case the interest incomes have not been declared or wrongly declared. It is a clear cut warning to tax evaders that the department possesses all the information relating to the deposits.
Lessons to learn:
- Declare your interest income yourself. To know interest income taxability and related exemptions, refer table presented below.
- Don’t think there is no need to report the income if the bank has deducted TDS. But TDS is only 10%, and if your income puts you in the 20% or 30% tax bracket, you have to pay the additional tax.
- Don’t think that you can avoid reporting your interest income. If the interest exceeds Rs 10,000 in a year, the bank or bond issuer will deduct TDS and credit it to your PAN number in your Form 26AS. If you don’t mention that TDS (and the income on which it was deducted) in your tax return, the computerized surveillance system in the tax department will immediately pick up the discrepancy.
- While form 26AS reflects only those payments on which tax has been deducted, the department can track your other deposits and interest payments received without deduction of tax too via information received from banks and other financial institutions.
You’ll have to declare even those interest incomes where Form 15 G/H has been filed and the total exceeds the maximum amount not chargeable to tax. (Form 15G/Form 15H are self-declaration forms by depositors to ensure that tax is not deducted at source where deductee expects his income to be lower than the taxable limit.)