NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Taxation of Debt Products
Under the Income-tax Act as applicable to a resident individual, interest received on a bank fixed deposit is taxed under which head of income, in the usual case where the deposit is held as an investment?
Interest on a bank fixed deposit held as an investment is taxed under the head Income from other sources. It is not a capital gain since nothing is transferred, and it becomes business income only when the deposit forms part of a business activity.
- 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 an investment is classified as Income from other sources. It is not capital gains because no asset is transferred. It is business income only if the deposit is a business asset of the taxpayer.
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