Do not forget to add bank FD interest to taxable income

Arnav PandyaThere are some small mistakes that people make when they are dealing with various aspects of their income and one of this pertains to the widely earned bank fixed deposit interest. In simple terms there is not much that the individual has to do when they are faced with the earnings from bank fixed deposits because this is taxable so it has to be included in their income. However there are a lot of people who do not do the right thing on this front and this has led to a situation wherein the tax department has had to publicly warn individuals to include the bank fixed deposits in their total income calculations. This has additional implications which need to be considered and here is a detailed look at the entire problem.Taxability of incomeBank fixed deposits earn interest for the individual and due to this it becomes an income for them. The question is whether this income is taxable or not. There is no scope for any confusion or ambiguity on this front as the interest received on bank fixed deposits is fully taxable. This means that the moment you receive a rupee of income from bank fixed deposits then it has to be included in the taxable income. This comes under the heading of income from other sources and since there is no deduction that is available the simple task before the individual is to simply add the amount of interest that is received to the taxable income that they have. Small figureOne of the reasons why a lot of people do not pay much attention to the interest on bank fixed deposits is that this is a small figure. It might be a few hundred rupees or a few thousand depending on the amount of fixed deposits that have been put with the bank. But this is not considered as being important and hence this is often ignored for the purpose of calculation of tax. The income tax department has clearly warned against this very act because they want to ensure that even the smallest amount that is earned is shown in the income calculations.TDS deductedAnother reason why individuals fail to disclose the interest from bank fixed deposits is that there is some tax deducted on the income. The bank will deduct tax at 10 per cent if the interest earned during the year crosses the Rs 10,000 mark. If this is the case then many people think that since tax has been deducted the necessary process is complete and they do not need to do anything more. Again this is not correct as even if the tax is deducted the amount has to be shown as income and it could be that the individual still has to pay additional tax especially when they fall into the 20 per cent and 30 per cent tax bracket. The difference in this case still needs to be paid.Past mistakesIf there is some such mistake that has been made by an individual and interest has not been disclosed then this should be disclosed. It will change the workings for the individual as the income and the tax to be paid figures changes. It could lead to an additional amount of tax to be paid and this should be cleared off. At the same time since the workings on the tax front differs the individual will also have to file a revised return with the new figures so that they are able to portray the correct situation on this front. This will ensure that the entire mistake is cleared up.