Incomes are earned through various means. But where income is earned, taxes may need to be paid. Typically, salary or business income form the largest parts of our income. However, there may also be smaller earnings through other means. There is interest earned on savings accounts, capital gains earned on mutual fund redemption, surrender value received on life insurance, and so on. What are the things we need to disclose while filing our tax returns? Let’s take a look.
Interest from savings
Savings accounts today offer interest rates ranging typically between 4 and 8 per cent. Periodically, your account is credited with this interest. In most cases, this interest amounts to a few hundred or a few thousand rupees for the whole year. For the current assessment year (2018-19), interest earned up to Rs 10,000 in a financial year is tax-free under Section 80TTA. However, if your interest earned exceeds Rs 10,000, the whole interest earned is mentioned as income from other sou-rces and taxed as per your slab.
Tax free income
There are various investment schemes and incomes on which you do not have to pay tax, subject to terms and conditions. For example, your investments in PPF or Sukanya Samriddhi Scheme are fully tax-exempt. Proceeds from a life insurance policy are tax-free under Section 10 (10d). Dividends up to '10 lakh in a year are also tax-free under Section 10 (34). For this assessment year, Long Term Capital Gains (LTCG) from sale of equity or equity mutual funds are fully tax-free. However, tax-free income needs to be reported in your tax returns even though you don't need to pay taxes on it.
Interest from deposit
Interest is also earned from recurring deposits, fixed deposits, bonds, non-convertible debentures, etc. This income is fully taxable in your hands. It is mentioned as income from other sources. If your income from bank deposits is more than Rs 10,000 in a year, banks will deduct TDS at the rate of 10 per cent. If your income isn’t in the taxable bracket, you can submit Form 15G and 15H to your bank so that they do not deduct TDS.
Interest from post office and small savings
Taxation rules vary from one investment to another. For example, earnings from your PPF account are fully tax-exempt. However, other small savings investments or postal savings and investments may attract taxes. You need to declare interest earned on National Savings Certificates (NSC), Kisan Vikas Patra, Post Office Deposits, Senior Citizens' Savings Scheme etc. These need to be mentioned as income from other sources.
