How is interest earnings on bonds of a noted business taxed?

I had actually bought bonds of a noted Company with cumulative alternative for interest. These bonds have actually been redeemed on July 15 this year and I have actually gotten the redemption cash of 1 lakh with 67,595 towards interest after reduction of TDS worth 7,511. I have actually disappointed any interest earnings in regard of these bonds in the past. My concern is whether this overall quantity 75,106 (67595 +7511) will be consisted of in my earnings of this year or is any relief readily available to me for interest gotten for a lot of year together.

– Ashok Bhatia

By Balwant Jain, Chief Editor, ApnaPaisa

Income is needed to be provided for tax under any of the 5 heads of earnings defined under the Income Tax Act. Interest earnings is normally taxable under the head ‘Income from other Sources”. Taxpayers are allowed to use their earnings under among the 2 approaches allowed in regard of earnings under 2 head of Income i.e. “Profits and Gains of Business of Profession” and “Income from other Sources”.

The very first approach is “accrual basis” under which you need to use the earnings for tax as and when the right to get it accumulates to you and, the other is to use it under “Cash basis” where the earnings will be provided for tax as and when it is gotten.

Since you have actually not provided the interest earnings for tax on accrual basis on annual basis in the past, you will need to use the whole interest earnings got for tax throughout the year of invoice i.e. the existing year. There is an arrangement under Section 89 for grant of relief in case income for more than twelve months is gotten in one year, whether in advance or in arrear, there is no comparable arrangement for giving relief in case of earnings of in the nature of interest. You will have to consist of whole of the interest in existing year’s earnings and pay tax at the piece rates suitable to you.

( Views as revealed by the professional)

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