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Income tax on fd interest and ppf account combined.

gunturboy26 (Self Employed) (217 Points)

26 December 2015

Hello everyone,
A friend of mine is unemployed but he gets around 1.5 lacs as interest from his fixed deposits for which he wants to submit 15g for no tds deduction.
My question is if he takes 1.5 lacs as a gift from his family members and deposits in his new ppf account, would this 1.5 lacs be considered as his income and added with the 1.5 lacs of interest and his total earning will become 3 lacs and he has to pay income tax? or as there is exemption on ppf deposits, it will not be considered as his income, so he can claim 15g benefit. What would be the case.
Many thanks in advance.

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14 Replies

Sonu Goenka (Professional) (62 Points)
Replied 26 December 2015

Any sum of money or property received by an individual or HUF in the following circumstances shall not be chargeable to tax:

a) Gifts received by an individual from his relatives;

b) Gifts received by an HUF from any of its Member;

c) Gifts received by an individual on occasion of his/her marriage;

d) Gifts received by an individual or HUF under a will or by way of Inheritance;

e) Gifts received in contemplation of death of the payer;

f) Gifts received from any local authority;

g) Gifts received from any fund, foundation, university, educational institution, hospital, medical institution, any trust or institution referred to in Section 10(23C);

h) Gifts received from any trust or institution registered under Section 12AA.

** ‘Relative’ shall mean:

1. Spouse of the individual

2. Brother or sister of the individual

3. Brother or sister of the spouse of the individual

4. Brother or sister of either of the parents of the individual

5. Any lineal ascendant or descendant of the individual

6. Any lineal ascendant or descendant of spouse of the individual

7. Spouse of the person referred in point 2-6 above

So if he get the money from the above mention relatives then it would not be taxable in his hand.

Secondly, if person does not has any other income except Rs. 1.5 lacs then no need to invest in PPF for tax saving as tax slab for the F.Y. 2015-16 is 2.5 lacs.

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gunturboy26 (Self Employed) (217 Points)
Replied 26 December 2015

Thank you Mr. Goenka for the reply.

He will receive money from his family members from the list you have given. My friend wants to save money for his future, so he wants to open ppf account not for the sake of saving tax.

So he can get the benefit of 15g as his total income is 1.5 lacs and also he can deposit 1.5 lacs which he recieves from his family and it will be exempted.

Sonu Goenka (Professional) (62 Points)
Replied 26 December 2015

Yes, you are right, he can do the same.

gunturboy26 (Self Employed) (217 Points)
Replied 26 December 2015

Thank you for the information Mr. Goenka.

CA SHAH DILEEPKUMAR (PARTNER) (144 Points)
Replied 27 December 2015

Mr. querist, if he will receive money from otherthan his family members as enlisted hereinabove and your friend deposit into ppf account, he will get income deduction of 1.50 lacs u/s. 80C of the Act, He won't be liable to income tax as his resultant income would be again 1.50 lacs that is below exemption limit.

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gunturboy26 (Self Employed) (217 Points)
Replied 27 December 2015

So, 80c will apply for money taken from family and 15g can also be claimed, so no income tax is paid.

Thank you for the information Mr. Dileep Kumar.

Ramanuj (Accountant.) (834 Points)
Replied 28 December 2015

AGREE WITH ABOVE

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gunturboy26 (Self Employed) (217 Points)
Replied 28 December 2015

Agree with my reply Mr. Ramanuj?

Vikas Shah (Articled Assistant) (41 Points)
Replied 29 December 2015

PPF interest is exempt from income tax and hence question of clubbing does not arise.

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S. Shiroor (Others) (1207 Points)
Replied 29 December 2015

The money recceived should be by cheque. If you put cash of 1.5 lakhs in PPF then it will come in 26AS in AIR and you will receive notice from IT dept.

See that 1.5 lakh is received from relative which is taxed income.

If the money is received from taxed income then filing 15G is correct

If if it otherwise than (say expense/salary ) to you then ur income is 3 lakhs though no tax will there though you have to file IT return and take TDS from Fd and 1.5lk exemption under 80C. .

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gunturboy26 (Self Employed) (217 Points)
Replied 29 December 2015

Originally posted by : VIKAS SHAH
	PPF interest is exempt from income tax and hence question of clubbing does not arise.

Thanks for the information Vikas.

gunturboy26 (Self Employed) (217 Points)
Replied 29 December 2015

Originally posted by : S. Shiroor
	The money recceived should be by cheque. If you put cash of 1.5 lakhs in PPF then it will come in 26AS in AIR and you will receive notice from IT dept. See that 1.5 lakh is received from relative which is taxed income. If the money is received from taxed income then filing 15G is correct If if it otherwise than (say expense/salary ) to you then ur income is 3 lakhs though no tax will there though you have to file IT return and take TDS from Fd and 1.5lk exemption under 80C. .