Skip to content

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 earned on a bank fixed deposit is taxed under which head of income, and when is it generally taxed for an individual following the cash system?

Bank fixed deposit interest is taxed under Income from Other Sources. A non-business individual following the cash system of accounting is taxed when the interest is actually received, not under capital gains, business income or house property.

  1. ACapital gains, in the year of redemption
  2. BIncome from other sources, on receipt basis for a cash-system taxpayerCorrect
  3. CProfits and gains of business or profession, on accrual basis
  4. DIncome from house property, on a monthly basis

Explanation

Interest on bank deposits of a non-business individual is taxed under Income from Other Sources. An individual following the cash system is taxed when the interest is received. Capital gains treatment applies to transfer of capital assets, not interest income, and the other heads do not apply.

Did you get it right without looking?

One question tells you little. A timed set on Taxation of Debt Products shows your real accuracy, how long you take and where you lose marks.

Practise Taxation of Debt ProductsFree diagnostic mock

More Taxation of Debt Products questions