What should I put Interest Paid OR Interest Accrued or add both for FDs in the interest income section while filing ITR? My understanding it we need to sum interest earned + accrued interest. Can you please confirm?
Interest paid should be included and is a must. Depending on the banks calculation, the accrued interest if shown in your AIS, then it can be taken into account. Only some banks like ICICI take into account the accrued interest in the statements. Though you receive more amount towards interest in the next year, they deduct the interest accrued in the last year while reporting income for the next year. So you need not calculate this during next year.
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…unless it is on an FD spanning across financial years,
with part of the “interest being paid out upon maturity”,
already having been disclosed/taxed as “interest-accrued” in previous financial year(s).
On FDs spanning multiple years,
disclosing/reporting interest-accrued each year is usually beneficial,
as it allows one to spread the income across multiple years.
What is important is to follow a consistent method,
and not change between reporting “interest-paid” and “interest-accrued” over the years.
Here’s an article on this topic with discussion along these lines.