FD Interest and Its Inclusion in Income Tax Returns

Are you curious to know whether the interest earned on your Fixed Deposits (FDs) needs to be reported in your Income Tax (IT) return?

Yes, you need to include the accrued interest on FDs in all banks in your Income Tax return. According to the Income Tax Department (ITD), the accrued interest for all your FDs will be reflected in your Form 26AS, a report that summarizes your tax deductions and TDS (Tax Deducted at Source).

Reporting Interest Income on FDs

Interest income from FDs should ideally be reported when filing your IT return. Depending on your financial status, you can report income either on an accrual basis or on a receipt basis. However, we strongly recommend disclosing the income to avoid future complications if TDS (Tax Deducted at Source) has been deducted.

Steps to Report FD Interest in Your IT Return

When finalizing your Income Tax return, you must include the interest earned from term deposits in banks and other companies. Typically, you can obtain an interest accrued certificate from your bank or other companies after the close of the financial year. If the interest accrued on term deposits for any customer ID exceeds Rs. 5000 in a year, the bank or company has deducted TDS, which you can cross-check with your Annual Tax Statement (Form 26AS) available online through the Income Tax Department's website, after logging in with your credentials.

TDS and Form 26AS

Form 26AS is a mandatory document that highlights the TDS deduction on your interest income. The interest accrued from FDs is generally considered as income from other sources, and TDS is deducted at the rate of 10%, 20%, or 30% based on the total income you earn in a financial year. In the event that your Total Income, including all sources, exceeds Rs. 50 Lacs, you are required to disclose all assets and liabilities in your IT return. This includes balances you hold with banks and other companies in the form of term deposits.

Important Disclaimer

Please note that the information provided herein does not constitute legal advice and does not create an attorney-client relationship. If you require legal advice, please contact an attorney directly. This article is not a substitute for professional legal advice and the author of this piece will not be held responsible for any action taken by the reader based on the content herein, as it is not based on a comprehensive understanding of your individual case. It is strongly recommended that you seek detailed professional advice regarding your specific situation.

Furthermore, the accuracy and comprehensiveness of this information may vary, so please ensure you verify all details from authoritative sources such as the official Income Tax Department.