In a circular released on Tuesday, the Central Board of Direct Taxes has
warned the taxpayers who do not declare all their interest income in
their ITRs to correct their ways. They have been asked to re-file and
rectify their returns for FY 2013-14 onwards.
You'll have to declare even those interest incomes where Form 15 G/H have been filed and the total exceeds
the maximum amount not chargeable to tax, that is, Rs 2.5 lakh. Only
interest income up to Rs 10,000 exempted under Section 10 may be left
out. The deadline for this is 31st March 2016. If missed, you will be
liable to pay a Rs 5,000 penalty under avoid penalty Section 271F of the
I-T Act.
While form 26AS reflects only those payments on which tax has been
deducted, the department can track your other deposits and interest
payments received without deduction of tax too via information received
from banks and other financial institutions. "Information regarding
interest earned by individuals and business entities on term deposit is
filed with the Income Tax Department by banks including co-operative
banks and other financial institutions and state treasuries, etc," said
the circular.
In an online survey conducted by economictimes.com last August, 30% of
the 2,168 respondents believed that interest of up to Rs 10,000 from
bank FDs is tax free in a year. However, as per the rules,the exemption
under Section 80TTA is only for the interest on the savings bank
accounts. What one earns from on fixed deposits and recurring deposits
is fully taxable. You also need to declare all those interest income
where TDS has been deducted or you have filed Form 15 G/H.