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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Taxation of Debt Products

Ms. Kavita Rao, a resident individual in the 30% slab (ignore surcharge and cess), earned Rs 40,000 interest on a bank fixed deposit during the year. She also holds listed zero-coupon bonds that she sold during the year. For the FD interest, the tax payable is:

The tax is Rs 12,000, because bank FD interest is taxed as income from other sources at the individual's slab rate, here 30% of Rs 40,000. A 10% TDS is only an advance tax credit, not the final liability.

  1. ARs 4,000
  2. BRs 8,000
  3. CRs 12,000Correct
  4. DNil, since interest below Rs 50,000 is exempt

Explanation

FD interest is income from other sources taxed at slab rate. 30% of Rs 40,000 equals Rs 12,000. Rs 4,000 uses the TDS rate of 10% instead of the slab rate, which is wrong for final liability. No general exemption exists for such interest below Rs 50,000.

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