Infra bonds I invested in have matured. Income tax rules explained

Under the tax laws certain income become taxable on receipt basis and certain other income become taxable on accrual basis

I had invested ₹20000 in long term infrastructure bonds in the year 2011 for 10 years under cumulative option. The bonds matured in December 2021. I have received ₹44624 after deduction of TDS of ₹2736. An amount of ₹27360 is shown in my AIS as income from other sources. I have been showing the interest accrued on these bonds every year in my ITR for past 10 years as interest income. Since it is reflecting in my AIS and 26 AS now this year am I required to show the lump sum amount as income again this year and pay tax on it? Is there any way that I do not have to pay the double tax as I have already paid tax on accrued interest over past 10 years? How to reflect same while filing my ITR.

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

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

As far as disclosure in form No. 26AS and AIS is concerned, you need not worry. While filing the ITR please claim the full TDS as is shown in the form no. 26AS/AIS but show only the income for the year. As the income being shown in your ITR will be lower than the one shown in 26AS/AIS there is a probability that you may get a notice from the income tax department but you can explain the fact of the differential interest already having been offered for tax in earlier year. This would sort out the matter for you.

Leave a Reply Cancel reply