Fixed deposits are one of the most popular investment options in India as they offer assured returns and a relatively safe avenue for those looking to park their money away from market volatility. They are widely preferred by conservative or risk-averse investors, retirees, and those seeking predictable returns without taking on major investment risk.
However, the interest earned on FDs is fully taxable and must be declared in your income tax return () under the head ‘Income from Other Sources’. This income is taxed as per the taxpayer’s income tax slab rate regardless of whether TDS has already been deducted by the bank.
What happens if you forgot to report FD income in ITR filing AY 2025 ?
If you failed to disclose FD interest while filing your ITR for financial year (FY) 2024-25, you can no longer correct the omission by filing a revised or belated return as the deadlines for both have already passed. However, that does not necessarily mean all options are closed.
Taxpayers still have an opportunity to correct the omission through filing an updated return or. This form allows you to rectify errors or omissions and update your previous tax return.
It can be filed within four years from the end of the relevant assessment year. You can file ITR-U for preceding 4 assessment years (48 months). For FY 2024-25, ITR-U can be filed between 1st April 2026 to 31st March 2030.
Who is eligible to file ITR-U?
Any taxpayer who has made an error or forgot to declare certain income details in any of the following returns is eligible to file an updated return:
- Original return of income
- Belated return
- Revised return
An updated return can also be filed if you did not file ITR by its due date and missed the deadline for filing belated return as well. There are few other instances where ITR-U can help you stay compliant:
- Income is not declared correctly
- Chose wrong head of income
- Paid tax at the wrong rate
- To reduce the carried forward loss
- To reduce the unabsorbed depreciation
- To reduce the tax credit u/s 115JB/115JC
Taxpayers must also remember that they can file only one updated return for each assessment year.
How much extra tax you need to pay for filing ITR-U?
Taxpayers filing an ITR-U must pay the additional tax liability at the time of filing. The amount payable depends on how long after the end of the relevant assessment year the updated return is filed.
If the ITR-U is filed within 12 months from the end of the relevant assessment year, the taxpayer must pay an additional 25% of the aggregate of the tax and interest due. If it is filed after 12 months but within 24 months, the additional tax increases to 50% of the tax and interest.
For updated returns filed after 24 months but within 36 months, the additional tax is 60% of the tax and interest payable. If the ITR-U is filed after 36 months but within 48 months from the end of the relevant assessment year, the additional tax rises to 70% of the tax and interest due.
What happens if you ignore it entirely?
The details of interest credited during the year to fixed deposit are available through your Annual Information Statement () which can be automatically detected for any mismatched or omitted income data.
So, if you do not include the same in your ITR, you will probably get a notice from the income tax department.
Additionally if the assessing officer determines you intentionally under-reported or misreported income to evade taxes, you could be fined a penalty of 50% to 200% of the tax sought to be evaded on the unreported income under Section 270A of the Income Tax Act.