HUF Account In NSC Is Permissible

Updated: Nov 16 2003, 05:30am hrs

The PPF a/c of my mother has matured after 30 years. Will the maturity balance continue to earn interest eventhough she cannot contribute further The a/c officer with SBI branch has said that it will not. Pl ease clarify the position and if the a/c does earn interest, then please give the details of circular/notification. — Narendra Agarwal, agcomfin@sancharnet.in
The PPF 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 per cent 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 Any amount, in part or full, can be withdrawn in installments, not exceeding one year. The balance will continue to earn interest till it is completely withdrawn.
I appreciate the decision you have taken. It is not advisable to close the old account and open a new one, in view of the tax-free interest of 8 per cent, which, by itself, is quite attractive.



Your book In the Wonderland of Investments is a manual for investors and tax payers like me. Please accept my congratulations for the same. I have a doubt which is still eluding a reply even from my chartered accountant.
I have an LIC policy, new Jeevan Akshay Policy - Plan 144 and am getting a monthly pension of Rs 5,085 from LIC which is credited to my SB a/c on the first of every month. In one year, I am getting a total amount of Rs 61,020-taxable as pension.
The word pension is not appearing anywhere in the policy and instead the word “annuity” is mentioned in several places. My query to you is whether this sum of Rs 61,020 can be considered for computing standard deduction while submitting my IT return. If so what percentage of rebate will be considered. Please let me know the section of IT lawbooks which allows this deduction.
SR Iyer sriyer1@hotmail.com
Thanks a lot for the appreciation. The only reward that an author can look forward to is appreciation from readers like you. The regular payment you get from LIC is not a pension but an annuity. Even if the word pension were used in the name of the scheme, (eg. Varishtha Pension Bima Yojana), it is not a pension.
For that purpose, either there has to be an employer-employee relationship between the payer and the payee or the payment has to have a nexus with the salary that was earned (eg. superannuation-linked salary). Consequently, standard deduction will not be available.

I have become 65 on Sept 15, 2003. Kindly advise me if I shall be eligible for senior citizens benefit for the AY 2003-04 (FY 2004-05). — Bhagwan Singh, ishmatt2000@yahoo.com
Sec. 88B states that an individual who is 65 years of age or more at any time during the previous year shall be entitled to the rebate. Consequently, you can claim the rebate in the same year even if your birthday was 31st March.
Since you complete 65 years of age on 13.09.2004 you shall be entitled to income-tax rebate up to Rs 20,000 for FY04-05 (AY 05-06) provided the same benefit is continued. Similar is the case with Sec 80U and Sec 80DD which offers deduction for handicapped persons.
The deduction is available if the person is suffering from a permanent disability at the end of the previous year. The deduction is available for the entire year irrespective of the date on which the person began suffering from the handicap.
Unfortunately, there is no such clarity in the case of minor children for the clubbing purposes even in ITA. I am sure that this is an act of omission and the authorities would correct it in due course.
In the mean time, different ITOs can take different views. For professional tax (Maharashtra) the provision granting exemption to senior citizens states, “The persons who have completed the age of sixty-five years, provided that such mental retardation shall be duly certified by a registered medical practitioner!”
This implies that anyone who celebrates his 65th birthday becomes mentally retarded from the next day onwards. After completing 65 years, I claimed the exemption from professional tax, though my mental faculties were in proper place.
I was denied the benefit because I was not over 65 years of age during the entire year! If you are still working, you will be entitled to exemption from professional tax only from FY05-06.

I had invested a sum of Rs 30,000 in NSC, in March 1997 in the name of my HUF. Now the postal authority is refusing to pay me the interest on maturity as they say investment in the name of HUF was not permitted. I will be highly obliged if you can give me details on the matter. — Jayanti Kunvarji Dedhia, jdedhia@rediffmail.com
MOF (DEA) Notification No. GSR 572 (E) dt 2.8.01 has opened up NSC directly in the name of HUF. Prior to that date, the account could be opened in the name of any member of the HUF and the tax benefits could be claimed if the subscription came out of the funds of the HUF.
The postal authority is wrong and is possibly trying to harass you for seeking some rent from you. If it was not permitted, why did the postal authority issue a NSC in the name of the HUF

The author may be contacted at anshanbhag@yahoo.com