As per Rule 9 (b) of the Senior Citizens Savings Scheme, ?In case the account is closed on or after the expiry of two years from the date of opening of the account, an amount equal to 1% of the deposit shall be deducted and the balance paid to the depositor?.
Now the question is how to treat this deduction for Income Tax purpose. Can the ?Deduction? be treated as reduction from the amount deposited – ?Capital?, or is it to be treated as reduction from the interest paid during the earlier period? If the deduction is by way of reduction in the capital, can this be claimed as Short Term Capital Loss, as the holding period is less than 3 years?
?Sharad Hatekar
As observed correctly by you, the specified percentage of the deposit shall be deducted and the balance paid to the depositor. It is still not clear whether this deduction is from the capital or the interest. However, the Note-2 under the Rule states, ?In case of premature closure of account, the interest is payable up to the end of the month preceding the month in which the account is prematurely closed.? It is clear that this is a capital loss. This leads us to the next question — Is it eligible for being claimed as short/long-term capital loss?
I had dealt with similar situations in my book, ?In the Wonderland of Investment?. Hereunder is an extract from my book —
?When a financial asset is transferred, the surplus or deficit is a capital gain or loss. Regular income-paying avenues like bank deposits, NSCs, Co-FDs, etc, are certainly financial assets and therefore, if we can go strictly by the letter of the law, we can claim long-term capital loss even on such instruments! This is illogical.?
For instance, at the end of the term of 5-year bank deposit, the depositor can use indexation and claim long-term capital loss.
However, in actual practice, no one makes such a claim and even if made, the department is not likely to admit it.
Are capital gains (loss) from stock futures (STT paid) considered as short-term capital gains (STCG)? Can loss from these trades carried forward to next year?
?Somesh
Profit or loss from futures/options is to be treated as trading income/ loss and not as STCG. Loss from these trades should be first set off against house property income or income from other sources, if any. Any left over can be carried forward for 8 years for similar set-off. Note that such losses cannot be set-off against either salary income or income from capital gains.
I opened a PPF Account in Post Office in March 1991 which matured on March 30, 2006. Then I got it extended for another five years. In April 2006 I withdrew some amount from this account. Now I want to withdraw the remaining amount.
1. Can I withdraw the total remaining balance along with up to date interest?
2. Can this account be closed premature before the expiry of extended five years?
3. If I cannot withdraw the whole amount, what percentage of balance amount can be withdrawn?
?Prof Ram Murti (Retired)
At its maturity, the account can be continued for a block of 5 years. This facility is available for any number of blocks on expiry of the extended term. The continuation can be with or without contribution. Once an account is continued without contributions for one year, the subscriber cannot change over to with-contributions extension. [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, in the case of account extended without contribution, withdrawals can be effected in installments, not exceeding one in a year. The balance will continue to earn interest till it is completely withdrawn.
I have two houses, both purchased using housing finance. However, my company HR payroll department has not considered the interest paid on the second property for calculation of TDS. They have just considered an amount of Rs 1,50,000 on account of interest on the first property. That being said, interest on the first property itself is more than Rs 1,50,000. However, I am given to understand that Rs 1,50,000 is the maximum limit. That is fine. But what about the interest on the second property? I haven?t got any firm answers from them and was hoping you could throw some light on this issue.
?R J
The deduction on interest paid on one property is limited to an amount of Rs 1,50,000. The second property is taxable (even if not rented out, the annual value is taken on a notional basis) and consequently the entire amount of interest is tax deductible. However, the same cannot be considered for the purposes of arriving at the TDS amount on salary. Therefore, the HR department of your company is correct and is just following the law. You will have to individually claim the interest deduction on the second property through your tax return.
?The authors may be contacted at wonderlandconsultants@yahoo.com