Suvarna filed her Income Tax returns for FY 2019-20 on time. Her source of income includes Salary from employment and interest income from Bank. She has received an SMS from the Income Tax department which states that the income identified by them against her PAN (Rs. 2,98,000) does not appear to be in line with the income tax return filed (Income from Other Sources in ITR – Rs. 2,50,000). Suvarna is confused and shocked in seeing this message as she has considered all relevant information (including TDS on interest on FD) from 26AS and Form16 and only based on that she has filed her returns. What should she do now?
INCOME FROM OTHER SOURCES (IOS)
IOS in income tax return includes interest on term deposits, recurring deposits, savings bank accounts and interest accrued in savings account opened under capital gains account scheme, etc. TDS is deducted by Bank u/s 194A for interest on term & recurring deposits. But the Banks do not deduct TDS on interest on savings bank account. It is the responsibility of the account holder to evaluate and pay taxes on SB account interest.
80TTA
Deduction u/s 80TTA is available for interest earned on savings bank account up to Rs. 10,000 in a financial year. If the interest earned on all savings bank accounts in a financial year crosses Rs.10,000, the assessee is liable to pay tax on the incremental value.
26AS VIEW
26AS (Tax Credit Statement) of an assessee provides details of transactions on which TDS is deducted. Interest on Savings Bank account will not find a place in 26AS as no TDS will be deducted by the Bank.
GOOGLY
Suvarna seems to have filed her ITR by considering only her 26AS and Form16. The difference in income (298K vs 250K) could be due to the interest earned on savings bank accounts which is liable for tax at applicable slab rate.
ACTION POINT
When you receive a notice or query from the Income Tax Department, it is important that you respond on time by accepting or denying the information as applicable. This is the first step in ensuring one does not get into further trouble with the taxman.
In Suvarna’s case, it seems to be a mistake of not declaring the savings bank interest in the ITR. Hence it would be appropriate for her to respond to the query and file a revised return for the additional income which was missed to be declared.
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