Tax is unavoidable and can be very hard at times to deal with. Tax is liable to be deducted on interests if it is above a certain limit. Such interests are known as income interest and should be reported in an individual’s income tax return. Savings accounts, Recurring accounts, Fixed Deposits, etc., earn income interest.
Many individuals, however, do not know how their income interest is getting charged or how the tax is treated in this case. It becomes necessary for people to understand the slab rates of taxation on different investments from which interest income is derived.
As per the Income tax slab rates, interest on Savings account applies to the investor. According to 80TTA of the Income Tax Act, the interest of up to 10000 earned from post-office, savings account or co-operative banks is exempt from tax. This is applicable for individuals and HUF. If the interest exceeds 10000, the extra income becomes taxable.
Interest from fixed deposits is taxed on an accrual basis at the applicable slab rate. The interest on fixed deposits is fully taxable according to the slab rates applicable to the person. Interest earned on Recurring accounts attract a tax deduction of 10% on the total interest. The TDS deducted on interest earned on Fixed Deposits and Recurring account are same.
Interest on corporate bonds is taxable on an accrual basis at slab rates. Our Managing Director, Mr Vaibhav Sankla, explains long-term capital gains and the short term gains, making it easy for people to differentiate between them and calculate them according to slab rates.
Interest earned from PPF is fully exempt from tax without any limits. Both interest and withdrawal on PPF are tax-free.
Source : Business Today