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When in Interest on Fixed Bonds Taxable

Interest on Fixed Rate Bonds

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Clinet has money deposited in Fixed rate deposit for 2 years. Capital+interest to be paid upon maturity.

My question is: is interest payable taxable in the year even though it never credited the client account.

thanks

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07th Aug 2018 14:03

I should have said not. It's only accruing until it's paid at maturity

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07th Aug 2018 14:09

From memory it's taxable on maturity, or on sale if the bond is sold earlier (if it's in the form of a security), or when credited to the account (if it's held in the form of a bank account).

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07th Aug 2018 14:25

.

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07th Aug 2018 14:22

Is it a deposit or a bond?

Is the interest in year 2 calculated on the balance plus year 1 interest?

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By A_non
07th Aug 2018 15:32

thanks for response.
Its both actually. 50% in deposit and 50% in bond. Interest in both cases payable on maturity.

To complicate things further, both held abroad in India.

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07th Aug 2018 16:02

Only way to tell is by examining the investment paperwork.
Post Office used to do bonds where nothing was paid till end but was taxable on an accruals basis.

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By CTA
07th Aug 2018 16:34

Am I missing the point here?

SAIM2440:

"ITTOIA05/S370 provides that tax is charged on the full amount of interest arising in the tax year. This means that a person receiving interest cannot set off any interest payable, bank charges or similar amounts against sums chargeable under ITTOIA05/S369.

Interest ‘arises’ when it is received or made available to the recipient. Interest has been made available if it is credited to an account on which the account holder is free to draw."

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to CTA
07th Aug 2018 17:35

CTA wrote:

Interest ‘arises’ when it is received or made available to the recipient. Interest has been made available if it is credited to an account on which the account holder is free to draw."

That's what I was (unsuccessfully) trying to establish by asking if year 1 interest was credited at the end of year 1 so that in year 2, interest was earned on the original investment plus the year 1 interest.

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to Accountant A
07th Aug 2018 17:51

...and I was suggesting in my reply :)

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