POSTED BY February 7, 2012 6:08 am COMMENTS (4)ON
I have a bank FD. Its for around 5 years. I don’t take monthly interest from it. At the end of 5 years, I get a lumpsum amount. So when should I pay the tax for this amount. Should I pay the tax only at the end of 5 yrs? Or should I be paying tax every year. Should I even show it as a source of income till the end of 5 years? The tax consultant with whom I am planning to file tax is asking me to pay it every year. But my concern is why should I pay tax every year when I am getting amount only at the end of 5 yrs.
Also, if I pay the tax every year, and in fourth year due to some emergency if I break the FD, I am going to get less interest since I did not keep it for all 5 yrs. However, I have already paid the tax assuming I will get better rate. So what should be done in such a case?