Interest Accrued/Paid on FD and Savings account

POSTED BY venkat ON July 28, 2012 9:55 pm COMMENTS (2)

Banks give statement of interest paid/accrued on bank savings account/Fixed deposits for the financial year. Suppose if the FD is for one year from say, Aug 2010. As of MAR’11 the interest accrued for the period Aug’10-MAr’11 is given by the bank. And tax to be paid on this accrued amount. Now when the FD matures by Aug’11, the interest is paid. And in the year end statement, how does the bank show this amount. Will it be shown as the interest paid minus the last year’s accrued amount, or total interest paid?

2 replies on this article “Interest Accrued/Paid on FD and Savings account”

  1. jagadeesha says:

    venkat,
    banks calculate the interest on fixed deposits at monthly/quarterly intervals. so they recover the tax on interest paid during a financial year. u will get less interest during the quarter ending march or if u have opted for reinvestment of interest/ cumulative option and opted to take the maturity value along with the interest, the maturity value u get will be less than what is indicated in the certificate by the tax deducted and the interest that should have been paid on the amount so deducted as tax.
    for example if the maturity value under the cumulative option for 2lakh deposit is 2.23lakh u will get 2.23lakh minus tax deducted in the financial year say 1200 and interest for this 1200 at the agreed rate.approximately u will get 2.16lakh even though the maturity value indicated in the certificate is 2.23lakh

  2. Dear Venkat, you may ask your bank to provide the break up of interest for the 2 periods. The exact tax calculation then can be done quite easily.

    Thanks

    Ashal

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