Every year in the months of June and July, Indian taxpayers would be rushing to file their Income Tax Returns. A common mistake which many taxpayers do is not declaring the interest earned on Fixed Deposits. This is partly due to the belief that a sum of ₹10,000 or lesser is not taxable. Also, banks do not deduct TDS when they don't expect interest income to go beyond ₹10,000 in a financial year. However, that is not true.
- Only interest up to ₹10,000 earned on SB (Savings Bank) account is exempt from income tax. The total amount earned needs to be mentioned in Section 80TTA. The exempt amount would be computed by the system / offline utility.
- Every rupee of interest earned on FD (Fixed Deposits) and RD / CD (Recurring / Cumulative Deposits) is taxable as per a person's income tax slab. All income earned through these instruments needs to be declared under the heading 'Income from Other Sources'.