Summary of this article
Unreported cumulative bond interest may be taxed on receipt.
SCSS interest after death follows post office savings rates.
SCSS tax deduction need not wait until April 2027.
I had invested in bonds of a listed Company with a cumulative option for interest, which matured in August 2026. I have not shown any interest income for these bonds in the past. Whether the total interest amount received is to be included in my income for this year while filing my ITR?
In respect of income taxable under the heads “Profits and Gains of Business or Profession” and “Income from Other Sources”, taxpayers have the option to offer their income either on a receipt basis or accrual basis. Under the accrual basis, you have to offer the income for tax as and when the income accrues to you, though not received, whereas under the cash basis you offer it for tax as and when it is actually received.
Since you have not offered the interest income for tax on an accrual basis for the past years, you will have to offer the entire interest income received during the year of receipt, i.e. the financial year 2026-2027, for taxation. Though there is a provision under Section 157 of the Income Tax Act, 2025 which is applicable beginning from the financial year 2026-2027 for claiming relief in case salary for more than twelve months is received in one year, whether in advance or in arrear, but there is no similar provision for granting relief in case of income of in the nature of interest is received for more than one year. So you will have to include the whole of the interest in your income and pay tax at the slab rates applicable to you.
My father had made a deposit in a Senior Citizen Savings Scheme (SCSS) account in her in her single name, with his daughter, me, as the nominee. One SCSS deposit was made in on 15th April 2026 to avail of section 123 of the Income Tax Act, 2025 tax benefit. She passed away on 30th September 2026. We will file her ITR for the 26-27 financial year next year and will claim the section 123 deduction for deposits made in SCSS. Should we close the SCSS account only after 1st April , 2027, so that there is no issue for the Section 123 deduction? We will have to forgo the interest for all SCSS Deposits since we were told that interest payment stops on the date of demise of the SCSS Depositor. Please advise.
As per the Senior Citizen Savings Scheme 2019, the interest on the SCSS does not stop on the date of death of the account holder altogether but is paid at the rate applicable on the savings accounts of the post office from the date of death till the date on which the amount is actually withdrawn.
As far as claim for deduction under 123 is concerned, as per plain wording of section 123 it can only be reversed if the person who had deposited the money himself withdraws the money before completion of five years. However, in case the account is closed due to the death of the account holder, there is no provision for reversal of the tax benefit available on the basis of deposits to the taxpayer. So, in my opinion, there is no need for you to keep the money in the SCSS account till April 2027 to claim the deduction, as long as you preserve the proof of money deposited in the SCSS account.
The author is a tax and investment expert and can be reached at jainbalwant@gmail.com
(Disclaimer: Views expressed are the author’s own, and Outlook Moneydoes not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.)
