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I wish to mention that my FD for ₹3 lakh were opened in 2019 for a period of 8 years at 6.25 per annum and these are maturing in 2027. Can I show the entire interest arrived in 2027 for the above-mentioned FDs on receipt basis during AY 2028-2029? If so, what is to be done in IT Returns to be filed for AY 2021-2022?
G.R.K Rao
Interest on fixed deposits is typically taxable under the head income from other sources unless someone does it as his/her business. Accordingly, the tax payer can adopt either cash or mercantile basis for taxing interest income. Under cash basis, the income earned shall be offered to tax on actual receipt basis. However, under mercantile basis, the income accrued each year needs to be offered to tax in the respective years.
Therefore, you can offer the FD interest income either each year on accrual basis or in the year of maturity viz. FY 2027-28 on receipt basis.
If your banker has withheld / withholds taxes on accrued bank FD interest each year then it will reflect in your 26 AS (Annual tax statement) and AIS (Annual Information System) of respective year. In case you would like to offer the entire interest in the year of maturity then you would have to carry forward the taxes withheld till the year of maturity while filling up the tax return. (Schedule: Details of Tax Deducted at Source on Income- As per Form 16A issued). Since the tenure referred in the case above is long, there could be practical difficulties in tracking income and taxes withheld. Further if the tax authorities were to raise any queries on account of interest income mismatch between form 26AS and tax return, then appropriate explanations should be provided.
During August 2018 I had invested in equity shares ₹20,000, NCDs ₹3 lakh and FD ₹1 lakh with DHFL. Subsequently, after the resolution plan approved by NCLT, in Sept 2021 against my investments I have received NIL for equity shares, ₹1.38 lakh for NCD and ₹25,000 for FD. From ITR point of view for FY 2021-22 i.e. corresponding to AY 2022-23, please advise me can I claim Long Term Capital Loss for all of three investments as mentioned above? If yes, then under which section and/ or head of income tax?
SN Saiya
As per section 2(14) of the Income tax Act, 1961, the term ‘capital asset’ includes equity shares, securities, properties, etc. subject to specified exclusions. Listed securities held for more than 12 months shall be regarded as Long-Term Capital Asset (LTCA) and any gain arising from the transfer of such capital asset is taxable as capital gains.
Equity shares and NCD qualify as capital asset under section 2(14) of the Act. As the period of holding is more than 12 months, they qualify as LTCA. As per section 74 of the Act, long-term capital loss cannot be set off against any income other than long-term capital gain. In case you don’t have long term capital gain from any other capital asset, then the loss can be carried forward for 8 immediately succeeding assessment years. You may note that there are conflicting views on treatment of loss pursuant to cancellation of shares. Accordingly, it is advisable to examine the facts and the underlying documents clearly before taking a position.
With respect to fixed deposit, it doesn’t fall under capital asset and therefore loss on the FD cannot be claimed as capital loss and cannot be carried forward as per section 74 of the Act.
The writer is Partner, Deloitte India
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