Tax query: What’s the taxability of interest on FD credited by a co-operative bank? January 10, 2021 This is with reference to the reply given ( published on November 16, 2020) to a query raised by H S Murlidhar. The query was regarding taxability of interest on FD credited by a co-operative bank, which is not allowed to be withdrawn due to restrictions imposed by the RBI, following an alleged fraud at the bank. Under Income-Tax Act, an individual is allowed to follow cash or mercantile method to account for his income. Hence, I think, , he may account for the FD interest as and when he is permitted to withdraw the same, from his account. Accordingly, he can postpone accounting of FD interest credited to his account till he is allowed to withdraw, and pay tax during the year of withdrawal instead of in the year of credit to his account. Otherwise, he is compelled to pay tax without actual receipt of interest. Kindly advise if it is right to do so.