NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Taxation of Debt Products
Under the current income-tax law applicable to resident individuals, interest earned on a bank fixed deposit is taxed under which head of income (assuming the deposit is not held as business stock-in-trade)?
Interest on a bank fixed deposit held as an investment is taxed under the head Income from other sources, at the investor's slab rate. It is not capital gains because there is no transfer, and not business income unless the deposit is business stock-in-trade.
- AIncome from house property
- BProfits and gains of business or profession
- CIncome from other sourcesCorrect
- DCapital gains
Explanation
Interest on bank deposits, bonds and debentures held as investments is taxed under Income from other sources. It is not a capital gain because no asset is transferred, and it is business income only if the person trades in such instruments as a business.
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