Interest on Fixed Deposit - To declare or not to declare in Income Tax Return?
Every year while filing Income Tax returns, a common dilemma that we all face is - whether to declare income from Fixed Deposit interest or not. Many doubts and questions arise in our minds - Is it necessary to declare? Should I save some tax by not declaring it? If I don’t declare, how are they going to know how much income I have earned from FD interest? What do other people do? ..... And the answer to the last question usually always subsides any other doubts and we go off filing returns without declaring FD income. But however much we resist declaring FD income, legally as well as practically, we should be paying taxes on it as well.
Legal responsibility: Paying taxes on any income (except some exemptions) is our legal responsibility. Income from FD interest is TAXABLE. We are required to show this income under the head "Income from Other Sources" and pay tax on this income according to the tax bracket we are falling in.
Note: One needs to check how much tax has already been deducted by banks on FD interest. If FDs in a particular bank are earning interests exceeding Rs 10000/- in a year, that bank will cut TDS(Tax deducted at source) @ 10% on the interest amount. If they are deducting any TDS on your FDs then banks have to issue a TDS certificate in Form 16A. So check this Form or alternatively Form 26as to know how much tax is remaining to be paid by you.
Govt. knows it all : All our 'income from FD interest' gets reported to government. IT dept/govt can check anytime how much interest are we earning on FDs and how much are we declaring. Form 26as contains all this information. Read more on :How Income Tax Authorities Track Your Income and Taxes Paid (TDS) - Form 26 AS.