Accrued interest on CGAS A/c.

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  1. I have sold a property in Oct. 2014 and since I propose to construct a new house before October, 2017, the entire capital gain amount has been kept in FD under Capital Gain A/c. Scheme in July 2015. According to me the entire interest earned from the date of FD opening till the same is withdrawn for construction purpose, can be shown in the IT return for A.Y. 2018-19 (P.Y. 2017-18) .

    However, the interest accrued upto 31.3.2016 was shown in latest Form 26AS. Am I, therefore, to show the interest accrued on the same till 31.3.2016 as income while filing IT return for A.Y. 2016-17 along with other interest income? Why I ask this is because if I do not show this there can be query from IT Dept. On the other hand, if I include this accrued interest as income for current year, I may be liable to pay income tax for the current year and/or next year and again at the time of withdrawal of the CGAS fixed deposit in case I fail to complete the construction of a new house within the specified time limit as per IT Rules.

    Please therefore, let me know :

    1) Whether the accrued interest should be shown as income for current year as well as next year or can be ignored and shown at the time of completion of 3 years when the 3 year time limit will be over for construction of a new house?

    2) Or is there any way where I can show the accrued interest on the CGAS FIXED DEPOSIT but it will not be treated as income for the current year as well as next year while the IT return is being filed.

  2. ZED

    ZED Well-Known Member

    Nope, for the purpose of determining the income, we have to follow S.145, as per which, an (some) assessees can follow either cash basis or mercantile basis of accounting.
    So, it can be said (to some extent ) that its upto you as to whether to offer it to tax as per accrual basis or receipt basis.
    But however we have another provision S. 198 , which says;
    All sums deducted in accordance with the foregoing provisions of this Chapter shall, for the purpose of computing the income of an assessee, be deemed to be income received :

    This means if there has been a tax deduction, then that income is considered as income received.

    Now read both the sections together, as per S.198 , your income has been considered as received and as per S.145 you have to consider the income on accrual or receipt basis. Hence, your accrued income has been deemed to be received and therefore you should consider this while filing the return.

    I hope your other questions have also been answered in this reply.
    Let me know if you need to know anything else.
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