Rebate for PPF accounts

T. Banusekar

CAN I make an investment to the extent of Rs 60,000 in a Public Provident Fund (PPF) account, each in the names of my two minor daughters and my own name aggregating to Rs 1,80,000 ?

The rebate under Section 88 cannot exceed Rs 12,000, that is, 20 per cent of Rs 60,000. I understand that no interest will be paid on the excess over Rs 60,000 computed by aggregating the investments made in my name and in the name of my minor children. In this case, this will mean that no interest will be payable on Rs 1,20,000.

K. N. Varadarajan

Reply

The Central Government has amended the PPF Scheme through G.S.R. 908(E) dated December 6, 2000. The application form, Form A, issued through G.S.R. 908(E) makes it explicitly clear that no interest will be paid to a subscriber on the deposits made in excess of Rs 60,000 in a financial year. In computing this limit, the deposits made in the following names need to be aggregated:

*Self account.

*Minor(s) of whom the individual is the guardian.

*Hindu Undivided Family.

*Association of persons.

Query

I wish to know whether I can invest Rs 1,00,000 in a PPF account and by way of insurance premium to the LIC in the aggregate. I am aware that the rebate under Section 88 cannot exceed Rs 12,000 (20 per cent of Rs 60,000). I want to know if Rs 100,000 should be shown in Form 16 issued by the employer in respect of tax deducted at source, or whether this should be shown at Rs 60,000. Which of these will be more advantageous?

Anonymous

Reply

As the reader has pointed out, the rebate in respect of the investment made in the PPF account and by way of premium to LIC cannot exceed Rs 12,000. In this connection, the reader may also refer to the reply given to the query of Mr K. N. Varadarajan, published earlier in this column. As regards the amount that should be shown in the Form 16, it would not make any difference whether this figure is shown at Rs 100,000 or Rs 60,000 in terms of the rebate available.

Query

By the Finance Act, 2001, Section 194H has been introduced requiring persons other than individuals and HUFs, liable to pay any sum by way of commission or brokerage in a sum exceeding Rs 2,500, in a financial year to deduct tax at source. Therefore, tax has to be deducted on an agent who procures a deposit for a commission. Is there a procedure available under the Act so that no tax may be deducted on such payment of commission? Also clarify the meaning of `brokerage' or `commission'.

Gurudas S. Shanbhag

Reply

Under Section 194H, any person not being an individual or HUF responsible for paying commission (other than insurance commission) or brokerage on or after June 6, 2001, is required to deduct tax at source. Tax needs to be deducted at source:

*At the time of payment or credit, whichever is earlier;

*Where the sum payable or paid in a financial year exceeds Rs 2,500 and;

*Where the payment is to a resident.

Tax is to be deducted at source at 10 per cent (to be increased by a surcharge where applicable). If an assessee wishes that tax may not be deducted in respect of such commission, he may make an application to the Assessing Officer under Section 197 for lower or no deduction of tax at source. The Assessing Officer may issue a certificate authorising the person to deduct tax at a lower rate, or not to deduct tax at source.

For the purpose of this Section, commission or brokerage includes any payment received or receivable directly or indirectly by a person acting on behalf of another for services rendered. It also includes payments for any service in the course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing. Commission or brokerage, however, does not include payment made for professional services and service by way of buying and selling of securities.

Query

Are gifts from an NRI treated as income under the I-T Act and chargeable to tax or are they exempt? If they are chargeable, is there any exemption limit beyond which the same would be chargeable. What kind of documentation needs to be maintained in this regard to satisfy an Assessing Officer? Is it necessary that there should be a relationship between the donor and the donee.

B. Lal

Reply

A gift received, whether from an NRI or otherwise, is not income within the meaning of the I-T Act, 1961, and is, hence, not chargeable to tax. As regards the documentation required, the same will have to be weighed and decided based on the circumstances of each case.

In the case of gift from an NRI, the gift should, probably, be through normal banking channels. A further letter from the donor stating that the said sum has been gifted may be obtained by the donee. The donee, when called upon by an Assessing Officer, will have to prove the credit worthiness of the donor for which some evidences will be required.

The donee may also have to explain the reason for which the gift has been given, particularly, if the sum is large. There is, however, no need that there should be a relationship between the donor and the donee.

Tax Check

*The CBDT has finalised the rules for valuation of perquisites with effect from April 1, 2001.

*Employees are given an option to follow the pre-amendment rules.

*Value of rent-free accommodation not to exceed 10 per cent of salary for cities with a population exceeding 4 lakh, and 7.5 per cent for other cities.

Business Line invites queries on personal taxation issues to this column. They will be answered in the forthcoming issues of Business Line . Queries may be addressed to Tax Talk, Business Line, Kasturi Buildings, 859, Anna Salai, Chennai 600002, or by e-mail to vaidy@thehindu.co.in. (Readers are requested to mention `Tax Talk' in the subject line of their e-mails.)