Income tax returns are all about disclosing your income to the government in the most honest way. We must take care that no income goes unreported as a result of which we might land in trouble. We may, however, still miss out on certain things. Small incomes from bank interests, investments and other sources can easily get missed while calculating our income. This may happen because certain interest incomes may be beyond the ambit of TDS (Tax Deducted at Source) provisions. Therefore, the chances are that you might forget to include these interest incomes in your tax return altogether.
Here we present you some interest incomes that you might just miss out on unintentionally:
Interest on Post Office Recurring Deposits
TDS provisions do not apply to interest on post office recurring deposits. Therefore, the onus of paying tax on the interest income is on the taxpayer. Hence make sure you add the interest income on these RDs to your total earning for taxation purposes.
Interest on certain investments (co-operative society) exempt from TDS
No, tax is deducted at source on interest on savings account whether of a bank or a co-operative credit society or even a co-operative bank. Also, “interest paid to the shareholders of a co-operative society is free from the clutches of TDS provisions irrespective of the quantum of interest. However, you are required to include that income in your total income while calculating your tax liability. TDS will be deducted on interest on fixed deposits with banks, credit societies, co-operative banks, etc, in case the income from such fixed deposit exceeds the limit of Rs 10,000,” says Chetan Chandak, Head of Tax Research, H&R Block India.
Taxable bonds, debentures and similar securities
Under Section 193, tax is not deducted on interest payable on certain notified debentures issued by any institution or authority, or any public-sector company, or any co-operative society (including co-operative land mortgage bank or a co-operative land development bank). However, the interest income falls under the category of taxable income. Hence, you must include it in your total taxable income while calculating your tax accountability.
Interest on National Savings Certificates accrued in the last year
The interest accrued on NSC is taxable and must be included in the total income in your ITR. However, “every year this interest that accrues on NSC is re-invested and is eligible to be deducted under Section 80C. The interest that accrues in the last year of the tenure of the certificate is not reinvested as it gets paid to you on maturity. Hence, it is not eligible for deduction u/s 80C and gets taxed on maturity,” says Chandak.
Interest on PPF accounts
You earn interest on PPF accounts on a yearly basis, which is presently exempted from tax. However, that does not mean you do not have to report it in your tax return. You are required to declare the interest on PPF as ‘income claimed exempt from tax’ annually in your tax return.
Interest on tax-free bonds
In the case of oversubscription of bonds floated by institutions such as the National Highways Authority of India, the Indian Railway Finance Corporation, the Housing and Urban Development Corporation, the Indian Renewable Energy Development Agency, NTPC, the Rural Electrification Corporation and the Power Finance Corporation, the companies undertake partial allotment.
“They refund the balance amount of application money to you. Hence, you stand a chance to receive interest on application money as well as interest on the amount refunded. These bonds are tax-free. Therefore, they will not get reflected in your Form 26AS. But the interest will keep accruing to your account. Therefore, you are supposed to include it in your total earnings for taxation purpose,” informs Chandak.