I had opened my PPF account on 28/03/1989 for 15 years, which was further extended for five years.. Now this extended term of five years has also been completed on March 31,2009. The balance on maturity date was Rs. 4,83,488. However, in July 2009 I have further deposited Rs 70,000 without intension to continue this account for another term of five years.
Now, we want to close the account as I have to pay the installment of a newly booked flat at Noida. The bank has opined that as I have deposited an installment even after maturity date, the account is automatically extended for further period of five yr term. I would like to know whether any provision is there in laws of PPF for closing of this account. In other words, whether or not, PPF laws permit to extend the term automatically, without written application from account holder.
K. P. Gupta
We do not have good news for you. As per Notification F.3(6)-PD/86 dt 20.8.86, ?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.?
The best you can do is to take advantage of the following provision — ?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 Any amount, in part or full, can be withdrawn in installments, not exceeding one in a year. The balance will continue to earn interest till it is completely withdrawn.?
Also note that Form-H has to be used to declare the intention of continuing the account with 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.
If you have filed Form-H at the first extension in 2004 and not filed it until now, you may ask for the entire refund of the balance as on 1.4.09 (with interest) along with the contribution of Rs. 70,000 to the account (without interest on the grounds that this contribution is irregular. The bank may still refuse to close your account and ask you to file Form-H before the end of the year. However, do not take this action if you have not filed Form-H at the first extension. In such a case, file Form-H and thereafter, withdraw the amount you are allowed to withdraw as per the Rules.
I am salaried person and have residential property on my mother’s name at my native place. Now I have been given to understand that as per the new Direct Tax Code (DTC) if we sell that property on/ after April 2011 we have to pay the tax based on the tax slab my mother fit into.
We want to buy new house (but after 2011) by selling that property. So what would be your advice in this case, should we sell this property before 2011 and keep the money with us until we buy new house? Or is there any better way to save tax on this gain
Kapil Naker
The DTC has the following additional provisions –
For the purpose of indexation, the base date will now be shifted from April 1, 1981 to April 1, 2000. As a result, all capital gains between April 1, 1981 and March 31, 2000 will not be liable to tax.
An individual or an HUF shall be allowed a deduction, in respect of rollover of any original investment asset, from the capital gain arising from the transfer of the asset if the net sale proceeds arising from the transfer of the original asset are invested for purchase or construction of the new asset either within one year before the beginning of the financial year (FY) or during the FY in which the transfer of original investment asset is effected.
The deduction shall be allowed if the assessee does not own any residential house, other than the new asset, on the date of transfer of the original asset.
Therefore, if your mother does not own any other house than the one intended for sale, then reinvestment of the sale proceeds in another property will save her tax even under the DTC.
According to the new Direct Tax Code (DTC) the new slab of income tax is 10% for income between Rs. 160,000 to Rs.10,00,000. What if a person is surviving on only bank interest and the amount of interest earned is above Rs.160,000? The bank will be deducting TDS @ 10% – I am ignoring the surcharge / cess. So if an individual is earning say Rs.200,000 as bank interest then the bank will deduct TDS of Rs. 20,000, whereas his actual tax liability will be only Rs. 4000. This means that every individual, who is earning bank interest upto Rs.9,99,999, will be entitled to a tax refund of Rs. 16000 – presuming he has no other taxable income. Am I correct? Is the Finance Minister aware of this fact? Can it be brought to his notice? We all know that refunds do not come easily from the income tax department. Will this not encourage corruption?
Dastur
Yes, you are absolutely right as far as your computations are concerned. In fact, the DTC is detrimental to the small tax payer since a person earning up to Rs. 3 lakh was anyway paying tax @10% under the Income Tax Act and will be charged a similar rate under the DTC. However, under the DTC he stands to lose a whole lot of exemptions and deductions that are currently applicable under the ITA.
The following could be a possible solution to your problem. The TDS is applicable, if and only if, the interest paid by any branch of a bank on your FDs with it is over Rs. 10,000. All one has to do is to buy FDs from different branches of the same bank or different banks ensuring that the interest earned does not cross the limit of Rs. 10,000. The effort of selection is well worth the reward.
Incidentally, you have stated that you are ignoring the surcharge / cess, kindly note that concepts of surcharge and cess have been discontinued under the DTC.
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