Common Sources of Interest Income You Are Likely to Forget to Include in Tax Return
Disclosing all your earnings while filing income tax return is your basic obligation. Failure to furnish all your income sources may land you in trouble in the future. Many people might forget to include the incomes that accrue interest. Let's look at what are those sources of income that you tend to forget to include in in tax return
What Is Interest Income?
Interest incomes are interest earned from temporarily held saving accounts, fixed deposits, other investments etc. As the interest is not part of the original investment, they need to be recorded separately as interest income.
Fixed Deposit Interest
The interest accrued from your Fixed Deposit is taxable if the interest amount is above INR 10,000. For the same, there is 10 percentage of TDS (Tax Deducted at Source) deduction which can be adjusted in the return.
In case the tenure of FD is for 5 years, you may wait until the maturity date when the interest is credited to your account to file for the return. This can result in higher tax deduction. Instead, you can include the interest each year on the tax return for lesser taxation.
Savings Account Interest
Interest income earned less than INR 10,000 from a savings account in any bank is not taxable. The amount exceeding the limit should be declared in the income tax return.
Recurring Deposit Interest
There is no TDS deduction for Recurring deposit. Hence it becomes very important to for the taxpayer to include the interest income in the income tax filing.
National Savings Certificate (NSC) Interest
An investment of up to 1.5 lakhs in NSC gets a tax break under section 80C of the Income Tax Act. However, the interest accrued each year from NSC is taxable under the same section. There is no TDS deduction on the interest of NSC and the entire amount is taxable under the applicable slab.
Public Provident Fund (PPF) is exempted from taxation. However, you need to include it on your tax return for auditing purposes.
Post Office Saving Schemes
Just like other saving schemes, there is no TDS deduction on Post Office saving schemes. But the interest earned is taxable which should be declared in the tax return.
Though investment instruments like mutual funds, Systematic Investment Plan (SIP), Equities etc are nontaxable, the interest earned from them should be declared on the tax return.
Tax-paying is a fundamental duty and keeps in mind the above-mentioned pointers to declare your income while filing your tax return.