Chartered Accountant

Safe, secured & highly liquid, Bank FD is one of the most preferred time tested investment options for the investors. There are lot many people who prefers to have a Fixed Deposits in Joint name. Behind stretching happiness to the joint holder, it also carries sense to do so because in case of unfortunate eventuality, the other holder automatically becomes the owner of the investment. The surviving member need not go through the cumbersome process of additional documentation. However, there are number of issues arises about the TDS & taxability of income from such FDR. How about the tax treatment of interest income in case of joint FDR? Is it the first owner who is solely liable for tax? If not, what proportion of the income are all the joint owners liable for? There are doubts about the manner of deducting tax at source from interest income if deposits is in joint names. In respect of deposit in joint names, if there are also deposits in individual names with the same person responsible for deducting tax, should the interest on deposit(s) in joint names be aggregated with the interest on deposits in individual names?

1. The beneficial ownership of the FDR would be the basis for determining the TDS in case of Joint FDR.
2. How to recognize the limit of Rs. 10,000/-:
   In case of a deposit in joint names, say in two names, in the absence of any proof to the contrary, both the persons can be treated as payees for the purpose of deduction of tax under section 194A of the Act. As such, unless the person paying the interest on such deposit(s) has definite information about the beneficial ownership of the deposit(s), the interest payable under a joint account can be aggregated with the amount of interest payable by that person to any one of the payees in their separate or independent accounts. The persons responsible for deducting the tax are advised that, in the absence of any information to the contrary, they may aggregate the interest on a joint account with the interest on deposit in the individual’s account who has higher interest income.
   Thus, at an interest rate of 9% p.a. there is a deposit of Rs. 1 Lacs in a joint account of Mr. A & Mr. B and there are individual deposits of Rs. 5,000/- in the name of A & Rs. 25,000/- in the name of B, the payer may aggregate the interest of joint FDR of Rs. 5 Lacs with the other interest income of B & since the aggregate interest during a financial year exceeds Rs. 10,000/- the bank would be required to do TDS at the prescribed rate. The fact that the joint account may be styled as A & B instead of B & A will not make any difference.

No tax liability arises on inheritance of right in an uncompleted flat or Rs. 12 Lacs that might have been paid earlier by your father. Nothing is taxable on amount/property inherited by you after the demise of your father.