The infra bonds I have invested in have matured. Explanation of Income Tax Rules

Under the tax laws, some income becomes taxable on the basis of receipt and some other income becomes taxable on accrual basis. There are certain incomes which become taxable before accrual or receipt like salary, where salary earned in advance as well as salary earned, though not received, becomes taxable. In respect of capital gains, once the transfer takes place the capital gain becomes taxable, irrespective of the actual receipt of the consideration.

In respect of certain incomes which are taxable under the heads “Profits and gains of business or profession” and “Income from other sources”, the taxpayer is given an option to offer tax on his income either on accrual or receipt basis. The accounting method is followed consistently. Since interest income is generally taxable under the head “income from other sources”, it can be offered to tax on either accrual or receipt basis. As you have already offered interest on accrual basis on these bonds, the same may not again be taxed on accrual basis.

As far as disclosure in Form No 26AS and AIS is concerned, you need not worry. While filing ITR please claim full TDS as shown in Form No. 26AS/AIS but show income for the year only. Since the income shown in your ITR will be less than the income shown in 26AS/AIS, there is a possibility that you may get a notice from the Income Tax Department, but you are already aware of the fact of differential interest being paid for tax. can explain. in earlier year. This will solve your issue.

Balwant Jain is a tax and investment specialist and can be reached on Twitter at jainbalwant@gmail.com and @jainbalwant.

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