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This year you will have to give a break-up of your interest income when filing the basic income tax return (ITR) form, ITR 1. This will make it difficult to claim wrong tax breaks relating to interest income as the income tax department will be able to detect this easily.
However, as earlier ITR forms asked for declaration of consolidated interest from all sources – which includes interest from fixed deposits etc – it was not easy for the tax department to check whether the person had actually earned Rs 10,000 as savings account interest.
Similarly, from FY 2018-19, senior citizens will be allowed to claim up to Rs 50,000 as deduction from interest income from bank and post office fixed deposits. When only a consolidated interest figure is to be given in the tax return, the tax department would find it difficult to check whether the deductions were being claimed correctly, i.e., from interest income from the specified income source.
The latest income tax return form-1 for the FY 2018-19 asks taxpayers to provide a full break-up of the interest income and income from any other sources received during the year. The latest ITR-1 form software utility, which is now available on the income tax e-filing website, provides a drop-down menu from which a taxpayer is required to choose and specify the source of interest income.
In the ITR-1, five sources of ‘Other income’ are specified, namely interest from savings account, interest from deposits (Bank/Post office/Cooperative society), interest from income tax refund, family pension and any other. In case the ‘other’ option is selected by the individual, then he/she is required to provide the details of the income received.
The move appears to be aimed at preventing taxpayers from wrongly claiming deduction available under section 80TTA and 80TTB. In the previous year’s ITR-1 form, the taxpayers were asked to provide an aggregate amount of income from other sources received by them without specifying the nature and source of income, i.e., whether it is an interest income from income tax refund or from the savings account or fixed deposit.
Usually interest income received by an individual is taxable in his/her hands, unless specified in the Income Tax Act. However, an individual aged below 60 years can claim deduction under section 80TTA.
Similarly, from FY 2018-19, senior citizens (aged 60 years and above) can claim deduction under section 80TTB for interest income received from deposits held either with bank, post office or cooperative society. The interest income covered under section 80TTB includes interest earned from savings account, fixed deposits, recurring deposits, or any other deposits held with a bank, post office or cooperative society. Interest received from any other sources such as company FD or interest from bonds, non-convertible debentures is not eligible for deduction.
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