Do fixed deposits attract IT notices?
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Hi,
How big of a term deposit will be reported to IT dept? Say it is 10 lakhs, if we make 4, 5 term deposits of 5,00,000 lakhs each from the same savings account, will it attract IT Notice?
Asking for a relative who regularly files IT and EVERYTHING IS ABOVE BOARD but won't make fixed deposits because they were told that IT dept will issue notices. I have tried to reason with them, but they are adamant to avoid any kind of IT notice.
Thank you in advance.
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Depends on the economic status (read quota) of people also.
@Demon_slayer Notice doesn't come if you are outside purview of income tax depending on the interest you earn from the deposits and also if you are under any central government economic quota. If you are not, and you are paying your taxes fine, it won't come. Even if you are not paying taxes, it doesn't come for like 99% of people if FD is the only source of income you have. (real chacha hasn't paid single dime IT since 2016 - not sure if he is just unaware or plain stupid on FD of over 2cr)
All fixed deposits reported to it dept and shows in AIS, apart from that it dept sometimes ask for sources of Fund (maybe ur relative talks about this) for fds of 5 lakhs or above
What if the deposits are less than 5 lakhs? Will that stop IT from issuing notice?
If deposits are in sync with your income, no issues. You just need to declare the interest received in ITR. Banks will report cumulative FD interest.
Relative has a point. Bank deducts 10% TDS for 40k+ interest earned on FD.
so a 4/ 5 fd of 5L will fetch 1.4L interest per year, bank will deposit 10% of that to ITD. Most persons think this is only when Tax Dept comes to know about the bank income.
However if that relative is earning from nothing else or has low earning, he / she should do FD rather than keep money in savings and IT file to get back all money or simply submit 15G to stop this 10% deduction.
Anyways having savings interest or fd interests will show up in her/ his AIS. ITD knows everything. Its just that they haven't bothered to pursue all cases, maybe fearing outcry from masses.
They have a steady salary. What should they do?
One old guy had only fd income and he was 65 years old .. he deposited his money in fd and was getting monthly / qtrly income. But he got a notice for some 2016 trn last year and he had nearly 50000 rs as tds each year for past 4 years .... and he never claimed thinking he need not file ITR
Both savings and fd income are reported to ITD and it can be seen in your AIS.
So if you are keeping money in Savings or FD it doesn't matter. If someone wants to completely evade taxation then do cash transaction only.
There is no issue in having FDs of any amount, even crores, if
- the source of FDs are legitimate, i.e. you have paid income tax on the source of the FDs (if the source amount + other income sources fall under taxable bracket).
- you are paying income tax on the interest earned from the FDs (if the interest amount + other income sources fall under taxable bracket)
This is true even for savings account as it is no different than FD except that you get lesser interest (from IT POV). So if your relative is not making FDs then that huge amount of money must be lying in his/her savings account, and going by his/her logic he/she should receive IT notices for that too.
Many Tax Payers used to avoid Fixed Deposits earlier as there was frequent mismatch of TDS deducted by bank and that appearing in IT officers platform or Form 26AS. This resulted in rejection of TDS claimed in your ITR and raising of penal tax demand. In addition savings interest, though taxable, could be concealed as it was not being directly reported to IT deptt by the bank.
However now with the establishment of foolproof linkages of banks with IT Deptt, these problems have been resolved. Now all entries of TDS as well as savings interest (and SFTs, cash deposits etc.) are reflecting in Form 26AS/AIS.
Now there should not be any reason to avoid FDs in comparison to Savings deposits
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AIS will have all details and tax has to be paid