Can compound interest be taxed?
Curious about Compound interest
Yes, compound interest can be subject to taxation in India. The tax treatment of compound interest depends on the nature of the investment or savings account and the applicable tax laws and regulations.
For savings accounts, the interest earned is generally considered as "income from other sources" and is taxable under the Income Tax Act, 1961. The interest income is added to your total taxable income and taxed at the applicable income tax slab rates.
In the case of investments, such as fixed deposits, recurring deposits, or mutual funds, the tax treatment may vary based on the specific investment and its holding period. For example, interest earned on fixed deposits is taxable as per the income tax slab rates, while gains from certain longterm investments in mutual funds may be subject to capital gains tax.
It's important to note that the tax laws and regulations related to compound interest can change over time. It's advisable to consult with a tax professional or refer to the latest tax guidelines issued by the Income Tax Department or other relevant authorities for accurate and uptodate information regarding the taxation of compound interest in India.