while including in your tax returns you are likely to forget these interest income


1. Interest on locker fixed deposits

It is a common practice for banks, particularly public sector banks, to make it mandatory for customers hiring safe deposit lockers from them, to place fixed deposits linked to these lockers. That is, a customer wanting to hire a safe deposit locker in the bank's vault not only has to pay annual rent for the locker but also place a fixed deposit with the bank. This fixed deposit is linked to the locker. 

The minimum fixed deposit amount for this purpose varies from bank to bank but is normally not a large amount - mostly less than Rs 50,000. The FD is kept as a security deposit for the locker. The interest earned on the FD may be used to fund the rent payment for the locker or credited to the person's savings account with the bank or reinvested with the FD itself (in case of cumulative FDs). 

The FD tenure is normally several years as the deposit has to be kept with the bank as long as the locker is being used. As the principal amount of these FDs is small, often the interest per annum does not cross the interest limit of Rs 10,000 (per annum) beyond which tax is deductible at source on the interest by the bank


Consequently, TDS does not get deducted on this interest if this is the only FD that the person holds with that bank i.e. total interest income from FDs from one bank does not exceed Rs 10,000 in one year. 
2. Interest on and refund of application money
The financial year 2015-16 saw a large number of bond issues being floated by various institutions in the bond market e.g. from The National Highways Authority of India, the Indian Railway Finance Corporation, the Housing and Urban Development Corporation, the Indian Renewable Energy Development Agency, NTPC, the Rural Electrification Corporation and the Power Finance Corporation.

These issues were mostly heavily oversubscribed as they were tax-free bonds offering good interest rates. FY 2016-17 has also witnessed public issues of various financial instruments where oversubscription may have happened. 

Oversubscription means that a large number of applicants would have received partial allotment and refund of the balance amount of application money (for non-ASBA applicants). Along with allotment letters and refunds, Non-ASBA applicants would have received interest on application money and also interest on the amount refunded. 

This interest, being only for a certain number of days, is a small amount (a few thousand rupees generally) and often gets overlooked for that reason. Further, if the interest amount is clubbed with the refund amount or with the first interest payment on the bonds (in case of bond issues) then also the chance of it getting overlooked is high. However, this interest on application money or/and refund also has to be included in taxable income.


Posted by,

saket kumar singh ( Founder)

Lakshya wealth services
 

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