Section I: Income Tax and You

• Ques: Interest from fixed deposits, savings accounts, NSC is fully taxable
• Ans: Key points:
  • All incomes need to be reported, whether exempt from income tax or not.
  • Interest earned on bank accounts (savings and FD) are generally not reported due to misconception. Interest income, including accrued interest on NSC is taxable.
  • Money received due to compulsory acquisition of land is also taxable. Even the rent received from cell phone tower on roof of your house is taxable.
  • Long term Capital gain on stocks and mutual fund is not taxable, but still needs to be reported under exempt income in ITR2.
  • Basically, you need to report ALL income
  • TDS is deducted on your estimated income at rates specified by income tax. However, your actual income may be higher or lower. Therefore, you have to compute your tax liability at the end of the financial year. Depending on your income and TDS deducted, you may have to pay more taxes or may be eligible for refund.
  • Do not forget to mention bank details in your ITR, in case you have refund due from income tax.