Q.Mr. Sarkar holds Government securities and received interest of ₹45,000 (net of tax deducted at source at 10%) during the year. He paid his banker a collection commission of ₹500 for realising this interest. Compute his taxable Income from Other Sources under the head Interest on Securities.

The net figure received must first be grossed up for the TDS already deducted before any further deduction is applied.

Step 1 — Gross up the net receipt: Mr. Sarkar received ₹45,000 AFTER 10% tax was already deducted at source, meaning the ₹45,000 represents 90% of the true Gross Interest. Gross Interest = ₹45,000 ÷ (1 − 0.10) = ₹45,000 ÷ 0.90 = ₹50,000. (Check: TDS = 10% of ₹50,000 = ₹5,000; ₹50,000 − ₹5,000 = ₹45,000, which matches the amount actually received.) …

The most common error is treating the ₹45,000 net receipt itself as the taxable amount and forgetting to gross it up for the TDS already deducted — the Act taxes the GROSS interest, always, with credit for TDS given separately …