Interest on fixed deposit taxable

SC Vasudeva

Q. Is maturity amount of FD made under income tax rebate scheme taxable? If so, will total amount be taxable or only interest? Please advise.

— Mohinder Maingi

A. Maturity amount of the fixed deposit is not taxable. However, the amount of interest received/ receivable in respect of such fixed deposit would be taxable according to the method of accounting followed by the assessee.

Q.My son has got foreign citizenship. I am paying yearly premium on his life insurance policy on his behalf. Now, the policy has matured and I have received the cheque for maturity amount. Please advise how to encash it.

— Manmohan Singh

A. It seems the policy is in the name of your son and the premium in respect of the said policy is being paid by you. Normally at the time of maturity, insurance companies deposit the amount directly in the bank account of the person in whose name the policy has been issued.  However, as you have received the cheque from the insurance company on maturity of the policy, the same will have to be deposited in your son’s Non-Resident (Ordinary) bank account. 

Q.I am born citizen of Sweden but shifted to India with parents when I was 5-year-old. Now, I am 27. I have Overseas Citizenship of India (OCI). All my education was done in India. I am also working in India. I have got Aadhaar and PAN cards and filing income tax return. Can I open an SB account in India for salary transfer? Can I also open a PF account to save tax?

— H Paul

A. There should not be any difficulty in opening savings bank account for transferring salary to your account.  You should also be able to open a Public Provident Fund account as you are not an NRI. The prohibition with regard to the opening of PPF account applies to an NRI. According to the facts given in the query, your stay in India is for more than 20 years and you are working in India. Therefore, you are an ordinary resident Indian in accordance with the provisions of Income-tax Act 1961 (The Act). You are also not a person who is ‘resident outside India’ in accordance with the provisions of Foreign Exchange Management Act 1999. You should, therefore, be able to open a savings bank account as well as PPF account with a bank or post office.