Hellow Sir, this is about income tax. I am a senior citizen, having FDs, from my retirement benefits. These FDs are for a duration of 2 years each, maturing this month end, ie, yet to mature. However, the home bank has deducted TDS, as ACCRUED INTEREST. It is shown in 26 AS and 26 AIS also. My doubt is, when the proceeds of interest is yet to be paid, whether TDS is valid; also the when the actual interest payable falls in next Financial Year (2025-26) only, is there any necessity to reflect in my income tax return.

Ans: Dear Shekhar,

I understand your confusion. Let me clarify this for you.

The interest earned on Fixed Deposits (FDs) is fully taxable. It is added to your total income and taxed at the slab rates applicable to your total income. The bank deducts TDS (Tax Deducted at Source) on the interest earned if it exceeds ₹40,000 in a fiscal year (the limit is ₹50,000 for senior citizens).

Now, coming to your specific situation, the bank is following an accrual system where the interest is calculated and accounted for each year, even if it is not paid out. This is why the bank has shown the interest in your account, even though it has not been credited to your account.

The bank manager is correct in saying that the tax is to be paid in the year the interest is accrued, not when it is actually received. So, you will have to include this interest income while filing your tax return for the Financial Year 2022-23.

I hope this clears up your confusion.

Ans: You have to divide TDS deducted in FY 2023-24 in two parts.

For the TDS in proportion of income to be offered in FY 2023-24, you can claim TDS in FY 2023-24. For the interest income already offered to tax in FY 2022-23, you have to file form 71 and get the credit of said TDS in FY 2022-23.

Ans: You're right. Based on IT rules, TDS on FD interest might not have been applicable in your case. Here's a breakdown:

• TDS on FD Interest: There's no TDS deduction if the total interest earned from all your FDs with a bank is less than Rs 40,000 in a financial year. This limit is Rs 50,000 for senior citizens (aged 60 years and above).
• Form 15G/15H: By submitting Form 15G (for individuals below 60) or 15H (for senior citizens) in April 2023, you declared your income to be below the taxable limit. This should have exempted TDS on FD interest for the entire financial year (April 2023 - March 2024).

Possible Reasons for TDS Deduction:

• Crossed Interest Limit Misunderstanding: The bank might have mistakenly considered the total interest earned across all your FDs for the entire financial year (April 2023 - March 2024) and deducted TDS once it exceeded Rs 40,000 (or Rs 50,000 for senior citizens) from October 2023 onwards.
• Form 15 Not Processed: There's a chance your Form 15G/15H wasn't processed correctly by the bank.

Resolving the Issue:

• Contact the Bank: Reach out to your bank's customer care or branch manager and explain the situation. Mention you submitted Form 15G/15H and your income is below the taxable limit.
• Provide Documents: If needed, share a copy of your Form 15G/15H submission proof.

The bank should investigate and potentially reverse the deducted TDS.

Additional Notes:

• It's good practice to keep a copy of any forms submitted for future reference.
• If you still face issues, consider seeking guidance from a tax consultant.