New Tax Reporting Requirements for NBFC and HFC Interest Income in India

Indian investors earning interest from NBFCs and HFCs will face new reporting requirements in their tax returns for AY 2026–27. The Income Tax Department mandates clearer disclosure of such income under Schedule OS, eliminating previous ambiguities. This update affects various ITR forms and ensures comprehensive reporting of interest income. Despite these changes, the tax treatment remains unchanged, with earnings taxed according to individual slabs. The deadline for filing returns is July 31, 2026, with penalties for late submissions. Discover how these changes impact your tax filings.

By Narendra Chaudhary Apr 19, 2026, 11:42 IST

Changes in Tax Reporting for Investors

Thousands of Indian investors who benefited from fixed deposits and debentures offered by Non-Banking Financial Companies (NBFCs) and Housing Finance Companies (HFCs) during the fiscal year 2025–26 will now need to adhere to new disclosure requirements in their income tax filings. The Income Tax Department has rolled out an important update for the Assessment Year 2026–27, which necessitates clearer reporting of interest income in a designated section of the tax return form. The revised Income Tax Return (ITR) forms, including ITR-2, ITR-3, ITR-5, and ITR-7, now explicitly instruct taxpayers to report interest income from NBFCs, HFCs, and other corporations under the “Others” category of Schedule OS. This modification eliminates previous uncertainties, where taxpayers had to determine how to categorize such income themselves.

According to a report by Upstox, citing tax experts from Taxmann, the updated forms clearly indicate that interest earned from companies, NBFCs, and HFCs must be reported in this section. This encompasses income from fixed deposits and debentures, provided the taxpayer is not involved in money-lending activities.

Details of Schedule OS

Schedule OS is utilized for reporting income that does not fall under salary, house property, capital gains, or business income. With the recent updates, it now explicitly includes interest from investments in NBFCs and HFCs, alongside traditional income categories such as bank interest, dividends, and taxable provident fund earnings. Additionally, it covers various other income sources, including earnings from retirement accounts in specified countries, certain insurance bonuses, and gifts exceeding Rs 50,000 as per Section 56(2)(x). This broadened scope ensures a more thorough reporting of miscellaneous income.

Tax Implications for NBFC and HFC Interest

Despite the changes in reporting, the tax treatment of interest income remains the same. Earnings from fixed deposits and corporate debentures from NBFCs and HFCs will continue to be taxed according to the individual's applicable income tax slab. There are no special rates or concessions for this type of income. Consequently, taxpayers in the highest tax bracket may face up to 30 percent tax on this interest income, similar to that from bank deposits. The primary change for AY 2026–27 lies not in taxation but in the classification and disclosure, which is now clearly defined.

Different categories of taxpayers will utilize various forms—ITR-2 for salaried individuals with investments, ITR-3 for those with business income, and ITR-5 or ITR-7 for firms and trusts. The choice of form depends on the overall income structure. The deadline for filing returns for AY 2026–27 is set for July 31, 2026, for non-audit cases. Failing to meet this deadline may result in penalties under Section 234F, along with interest on any outstanding tax liabilities.