Do not miss out on fixed income interest
Financial advisor Arnav Pandya explains the the occasions when an individual might miss out on details while calculating tax liability. It usually happens when the income arises when it is easy to miss out some items when it is being calculated.
August 06, 2013 / 18:26 IST
Arnav Pandya
There are occasions when an individual might miss out on some details while calculating their tax liability. This happens not because of an intention to look the other way. Mostly, it is the manner in which the income arises that it is easy to miss out some items when the actual total or calculations are being made. Also read: e-IT returns register a sharp increaseThis is true especially when it comes to the question of fixed deposit income and many people have missed out on this aspect when they are dealing with their tax returns. Here is a look at how this happens and the manner in which it can actually be avoided.Fixed incomeOne of the ways in which an individual can have income is through the fixed deposit route. Here there is an investment made with the bank for a specific period of time and when this happens then there is a periodic interest that is earned on the deposit. An example is an investment amount of Rs 1 lakh that earns interest at 8.5 percent for a period of 2 years. The total interest earned during the year and the tax on this amount has to be calculated and then included for the purpose of the various tax calculations of the individual. There are some differences that often crop up when the total are being considered because the amount received by the individual would not match with the actual figure that would have to be intimated for the tax calculation.Earned and receivedThe main reason why this kind of situation arises for the individual is due to the difference between two terms. One is the interest earned on the deposit and the second is the interest actually received on the deposit. There are two ways in which the interest would be received by the investor. One is that there could be a specific period payout wherein this could be six months or three months or even a year. The other way is that the amount would be received at the time of maturity along with the principal and it could be that the deposit has matured. While the amounts that are actually received would be included in the income list there is a missing amount which represents the amount that is earned but is still not received.All depositsA situation of some interest having being earned but not received is likely to be present on many deposits unless and until there is a payment of interest on the last day of the financial year. In this case when the interest is paid on the last day of the year the amount of interest is calculated and paid till that point of time so there is nothing more to be done. On the other hand there is always some interest that is earned on the other deposits but this would become payable only at the next payment time period. An example is that if the interest payment comes in May then the interest from the last payment period of February to the end of March would have been earned but not received yet. It is important to see that these are included in the total income figure.Getting the detailsA question in front of the individual is the manner in which this form of income would be obtained and there is a simple way in which this can be done. The bank will give an interest certificate to the investor which will list out the entire list of income that is earned on the various deposits. Even the tax deducted at source certificate will give the interest as well as the tax deducted. This can be the route to ensure that the figure of both the income that is earned as well as the tax deducted matches properly and that there is nothing that is missed out when the workings are being done. The banks usually give these statements but if this does not come then it would be better to ask for the same. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
