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Income from Other sources

The Income Tax Department breaks down income into five heads of income for the purpose of income tax reporting:

  • Income from Salary.
  • Income from House Property.
  • Income from Capital Gains/Loss.
  • Income from Business and Profession.
  • Income from Other Sources.

Income from Other Sources covers income that’s not covered in any of the heads of income.

Interest income – be it from a savings bank account or a fixed deposit or from a post office savings account – are all shown under this head. Interest from both fixed deposit and recurring deposits is taxable while interest from savings bank account and post office deposits are tax-deductible to a certain extent income tax on income from other sources Bangalore. But they are shown under income from other sources.

Exempt income, those that are exempt from tax, is also included under this head.

Savings bank account interest income

Interest that gets accumulated in your savings bank account must be declared in your tax return under income from other sources.

Deduction on interest income under Section 80TTA

Section 80TTA allows for a tax deduction on interest income from bank savings account of up to Rs.10,000. Interest income from post office deposits is exempt up to Rs.3,500 for individual accounts. Interest income exceeding Rs.3,500 can then claimed as a deduction under Section 80TTA subject to a maximum limit of Rs.10,000.

How tax is calculated on fixed deposits?

Fixed deposit interest that you receive is added along with other income that you have such as salary or professional income, and you’ll have to pay tax on that income at a tax rate that’s applicable to you.

TDS is deducted on interest income when it is earned, though it may not have been paid. For example, the bank will deduct TDS on interest accrued each year on a FD for 5 years. Therefore, it is advisable to pay your taxes on an annual basis instead of doing it only when the FD matures.

Avoiding TDS on fixed deposits

Banks are required to deduct tax on interest income when deposits held in all the bank branches is more than Rs.10,000 in a year. A 10% TDS is deducted if PAN details are available. It is 20% if the bank does not have your PAN details.

The details of TDS deducted on Fixed Deposit Interest is in the Form 26AS.

If your total income is below the taxable limit, you can avoid tax deduction on fixed deposits by submitting Form 15G and Form 15H to the bank requesting them not to deduct any TDS. Form 15H is for senior citizens, those who are 60 years or older; while Form 15G is for everybody else.

These forms are for residents only and for those whose taxes add up to zero income from other sources calculation Bangalore. These forms must be submitted at the start of the financial year. If you missed submitting them, then you can claim a refund by filing an income tax return.

These forms are valid for one year only. Therefore, they must be submitted each year to keep banks from deducting tax.

Reporting fixed deposit and recurring deposits in your tax return

If you have three FDs open, then add up all the interest income and enter it under “Other interest income”.

Reporting recurring deposit

Starting June 2015, when interest income from all the branches of the bank exceeds Rs.10,000 in a financial year, a 10% tax on interest earned will be deducted. The interest earned should be shown in ‘income from other sources.’

Exempt income

The PPF and EPF amount you withdraw after maturity is exempt from tax and must be declared as exempt income from income from other sources income from other sources conclusion bangalore.

Family pension

If you are collecting pension on someone who is deceased, then you must show this income under income from other sources. There is a deduction of Rs 15000 or ⅓ of the family pension received whichever is lower from the Family Pension Income from other sources rate of tax Bangalore. This will be added to the taxpayer’s income and tax must be paid at the tax rate that is applicable.

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