?A subscriber, continuing a PPF account withfresh subscriptions, can withdraw up to 60%?

1. My PPF Account of HUF matures on 1-4-2008 after 15 years. Can it be extended for further 5 years?

2. If NO, have I to withdraw the full amount immediately or can I withdraw the amount after 4 or 5 months and will I get the interest on those 4 or 5 months?

3. Same case in one of the family Individual PPF accounts, which expires on 1-4-2008. I am not sure yet whether to extend the same or not. Can I again withdraw the entire amount after a certain period of time, in case wish to close the same, gaining interest as well? If so, within what period of time??

? Suhas

1. The account can be closed on completion of the term or it can be continued for a block of 5 years. This facility is available for a further block of 5 years on expiry of 20 years and yet another 5 years on expiry of 25 years and so on for any number of blocks – Yes, any number of blocks. The continuation can be with or without contribution.

Once an account is continued without contributions for more than a year, the subscriber cannot opt to change over to continue the account with contributions. [Notification F.3(6)-PD/86 dt 20.8.86].

A subscriber, continuing his account with fresh subscriptions, can withdraw up to 60% of the balance to his credit at the commencement of each extended period in one or more installments, but only one per year. On the other hand, the balance can be merely retained in the account without contribution till it is needed. Any amount, in part or full, can be withdrawn in installments, not exceeding one in a year. The balance will continue to earn interest till it is completely withdrawn. Form-H is to be used to declare the intention of continuing the account with subscription, whereas no special intimation is necessary to continue the account without subscription.

CBDT has declared [MoF (DEA) 7/21/88-NS-II dt 10.8.90] that neither the rebate u/s 88 (deduction u/s 80C at this juncture) nor the interest will be available on deposits after the expiry of 15 years (or each extended block) without exercising the option for continuance. These deposits will be treated as irregular. Form-H should be filed within one year from the date of extension. If an account holder has failed to file the form, he can approach MoF and pray to get the account regularised.

I want to know whether the money sent from the US, UAE, etc to an ordinary savings account (of another person other than the sender) in an Indian bank will be taxable or not?

I was told that all banks send statements to the IT dept regarding foreign money remittances to an individual’s savings account. Is it mandatory that the person who is receiving the money have an NRE account?

?Ashirvad

It is not mandatory that the person who is receiving the money should have an NRE account. The money may be sent to a resident account too.

However, the purpose for which you send the money is important. If it is a gift (or amount sent for household expenses) and you are a close relative of the donee, there is no tax. Otherwise, if the amount exceeds Rs. 50,000 during an FY, the whole of such an amount will be charged to income tax of the recipient.

The law regarding this is as follows:

Where any sum of money exceeding Rs 50,000 is received without consideration by an individual or an HUF from any person, the whole of such sum will be charged to income tax of the recipient under the head – Income from Other Sources.

?Provided that this clause shall not apply to any sum of money received

a) From any relative.

b) On the occasion of marriage of the individual.

c) Under a will or by way of inheritance.

d) In contemplation of death of the payer.

e) From any local authority.

f) From any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in Sec. 10(23).

g)From any charitable trust or institution. If the gift amounts received by the donee from all the sources, other than those mentioned above, exceed Rs 50,000, the donee has to treat the entire amount as income for the year and pay income tax thereon.

?Relative? means

i) Spouse

ii) Brother or sister

iii) Brother or sister of spouse

iv) Brother or sister of either parents

v) Any lineal ascendant or descendant

vi) Any lineal ascendant or descendant of the spouse.

vii) Spouse of the persons referred in clauses

(ii) to (vi).?

I have been residing in Ladhakh (J&K) w.e.f. December 2007 and am also a scheduled tribe member and working in an insurance company (government undertaking).

I have heard that the income of a member of a scheduled tribe residing in Ladhakh (J&K) is exempted. Kindly clarify and if exemption is available, then under which section/clause will it be exempted.

?Nawang Dorje

Yes, the exemption is still available.

To avail of the exemption, both of the following conditions must be satisfied –

1. The person must be a member of a scheduled tribe as defined by Article 366(25) of the Constitution of India and

2. He should be residing in any area in the state of Nagaland, Manipur, Tripura, Arunachal Pradesh, Mizoram or districts of North Cachar Hills, Mikir Hills, Khasi Hills, Jaintia Hills and Garo Hills or in the Ladakh region of the state of Jammu and Kashmir.

In that case, any income which accrues or arises to him

a) From any source in the areas or states aforesaid

b) By way of dividend or interest on securities from all over India does not form total income and hence is exempted from tax.

?The authors may be contacted at wonderlandconsultants@ yahoo.com