The taxation rules for interest earned on fixed deposits held with a bank have been clarified by the recent Krishna Kumar Agrawal v. ITO (2023) case. According to section 44AD, an assessee can disclose income from their business and receive the benefit of presumptive taxation. However, if an assessee earns interest on FDR/deposits held with a bank, they cannot include this income in the deemed income disclosed under section 44AD.
In the aforementioned case, the assessing officer made an addition to the assessee’s income under the head of “other sources” for the interest income earned on FDR/deposits. The assessing officer correctly noted that interest income does not fall within the domain of deemed income under section 44AD. Therefore, the addition made by the assessing officer was upheld, in favor of the revenue.
It is essential to understand that interest earned on fixed deposits held with a bank cannot be included in the deemed income disclosed under section 44AD. Instead, it falls under the category of “other sources” and is taxable separately. This clarification by the court reinforces the importance of following tax rules and regulations to avoid any penalties or legal complications.
In conclusion, taxpayers should be aware of the tax implications of their income sources and properly report them to avoid any legal issues. The recent Krishna Kumar Agrawal v. ITO (2023) case highlights the importance of understanding the nuances of tax regulations, particularly regarding interest earned on deposits held with a bank.
Mail us for any query at mail@nbaoffice.com
