Income tax on FD earned interest

POSTED BY Ramesh ON August 3, 2011 8:04 am COMMENTS (4)

Hi all,

Usually I make FD’s for 3 year period and during the maturity time the income earned is going into taxable slab.

For the first 3 years before maturity I am coming into NO TAX slab but during the maturity I am coming into taxable slab.

Does anyone faced this? Are there any ideas to avoid this?

Is this a good idea to make FD for 3 years but interest payable yearly and reinvest this interest into FD again.

Please share your views

 

4 replies on this article “Income tax on FD earned interest”

  1. bharat shah says:

    what i want to say is: bank always credits the interest on your fd at quarterly/half arly/yearly as per terms of fd. it is you, that keep there for accumulation/safety. thus interest income accrued at that time in that particular financial year. income tax act permits such income on accrual basis or receipt basis. so for reducing tax , you can treat the interest on accrual basis.

  2. Ramesh says:

    Hi Bharat,
    I dint get ur point clearly.
    Would you please explain more

    Thankyu for ur reply

  3. bharat shah says:

    i think, if you consider the interest earned in the financial year concerned , and so them in your it return every financial year concerned, you need not to show all interest in the year it matured. this is called ‘occuring’ basis accounting.

  4. This is a issue with some people . It happens that a lot of times people come in tax bracket at maturity , so the ideal thing was you should have opted for yearly payout and reinvest the interest in FD again as you suggested

    Manish

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