Declare All Income From Interest: IT Department

tax slab

The Central Board of Direct Taxes has issued a circular warning taxpayers about not declaring all their interest income. They have been asked to rectify their returns for FY 2013-14 onwards. The deadline for this is March 31, 2016. If missed, you will be liable to pay a penalty of Rs. 5,000 under Section 271F of the Income Tax Act.

So you have to show even interest income that comes from deposits for which Forms 15 G/H were filed. As per the rules, interest income (only from savings accounts) up to Rs. 10,000 are tax exempt.

While form 26AS reflects only those payments on which tax has been deducted, the department can track your other deposits and interest payments received without deduction of tax too via information received from banks and other financial institutions. “Information regarding interest earned by individuals and business entities on term deposit is filed with the Income Tax Department by banks including co-operative banks and other financial institutions and state treasuries, etc,” said the circular.

Vakilsearch's resident expert on starting up, compliance and accounting, he holds a Masters in Accounting and an LLB.