I purchased my first KVP in March 2016. Also, I purchased some NSCs, invested in MIS and RD then. In subsequent years, I purchased more KVPs and have been reporting accrued interest (earned from deposits in Post Office) on yearly basis in my ITRs. But mistakenly, I forgot to report interest of one KVP (worth Rs 50000) purchased in March 2020. My first KVP matured in FY 2024-25 and its full interest is shown in my ITR and AIS/TIS. What should I do to avoid double taxation on matured KVP and the missed reporting of KVP purchased in 2020?

Ans: As per income tax provisions, interest income can be offered on accrual basis (i.e. interest earned but receivable at later stage) or cash basis. But once you start offering income under one method, you cannot change.

In your case, Rs 24,624 is interest earned during tenure of 10 years. If you have offered interest income every year (even if not received) for FY 21-22, you have to offer interest earned between April 1, 2021 and maturity date of December 21.

Amount offered in Income Tax Return can differ from amount appearing in AIS, if income is offered correctly as per Income Tax provisions and appropriate reply should be filed in AIS feedback option.

Ans: If Interest Income is already offered to tax on accrual basis, it will not be taxed again on receipt basis. You can provide feedback against AIS accordingly and no need to offer the same income again.

Ans: Hi Ajay.

Good to know that you realized the net return post tax in time - better late than never.

Before answering your question, would want you to understand your financials in term of your emergency fund, proper insurances and other investments - if they are in place.

If you are getting any difficulty, you should consult a CFP who can help you with all this and help in avoiding mistakes like this in future.

Now if you are someone less than 50 years of age, can definitely consider prematuring the KVP so as to take maximum benefit of the better return when you can.

Net return of 4% for 3 years is better than taking it for another 7 years. By discontinuing this, you might end up losing a small amount niw but it will benefit you for another 7 years.

Best Regards

CFP Reetika Sharma

https://www.instagram.com/cfpreetika