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ppf query . tax

supernova (owner) (28 Points)

16 March 2009

sir,if i invest 70k annualy in my ppf account and also gift 70k to my son 1 yr old and transfer that 70 k in my son ppf account.and i take sec 80 c deduction only for 70k deposited in my ppf.now my query is whether the interest on both 70 k in my and son acc remain tax free?Also is it legally correct? can income tax auuthorities have any objection to this ? also is it that one can deposit a max of 70 k in it or that one can depsoit a max of 70 k in ppf combined of his name plus his al minor children

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14 Replies

supernova (owner) (28 Points)
Replied 16 March 2009

my main concern is not gift tax exemtion . its money deposited in ppf in minor name .

in case gift tax comes in picture then the minimum amount which can be transferred to a minor without leving of any type of gift tax can be considered

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Ashish M (Chartered Accountant) (2731 Points)
Replied 16 March 2009

if you open an account for your minor child. You can deposit Rs 70,000 in your account and Rs 70,000 in your child's account. But you will only get the tax benefit on Rs 70,000.

Just because you have one account for yourself and one for your child, it does not mean the tax benefit is doubled. The limit is the same -- Rs 70,000 -- irrespective if it all goes in your account or is divided between your account and your child's account.

supernova (owner) (28 Points)
Replied 16 March 2009

i understand i will get tax benefit ona total of 70 k only . not double . actual query is whether its legally correct

VINEESH KHANNA (CHARTERED ACCOUNTANT) (164 Points)
Replied 16 March 2009

If u deposit 70K each in your account and your son account, it is legally tenable and Interest on both the PPF account shall be exempt u/s 10.

I think IT Authorities will not have any issues with this planning.

You can deposit more than 70K in an PPF account, there is no restriction on this but keep in mind that the amount over and above Rs. 70K shall be taxable as your income u/h Other Sources.

Vineesh Khanna

VINEESH KHANNA (CHARTERED ACCOUNTANT) (164 Points)
Replied 16 March 2009

If u deposit 70K each in your account and your son account, it is legally tenable and Interest on both the PPF account shall be exempt u/s 10.

I think IT Authorities will not have any issues with this planning.

You can deposit more than 70K in an PPF account, there is no restriction on this but keep in mind that the amount over and above Rs. 70K shall be taxable as your income u/h Other Sources.

Vineesh Khanna

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VINEESH KHANNA (CHARTERED ACCOUNTANT) (164 Points)
Replied 16 March 2009

If u deposit 70K each in your account and your son account, it is legally tenable and Interest on both the PPF account shall be exempt u/s 10.

I think IT Authorities will not have any issues with this planning.

You can deposit more than 70K in an PPF account, there is no restriction on this but keep in mind that the amount over and above Rs. 70K shall be taxable as your income u/h Other Sources.

Vineesh Khanna

CA CS CIMA Prakash Somani (Landmark Group) (23502 Points)
Replied 17 March 2009

The first and formost rule of income tax is "what you are not allowed to do directly you can not do that indirectly". The Interest from PPF is tax free but the clubbing of interest may be done in your favour.

CA CS CIMA Prakash Somani (Landmark Group) (23502 Points)
Replied 17 March 2009

supernova (owner) (28 Points)
Replied 17 March 2009

can anyone suggest some site where more details can be read regarding this

supernova (owner) (28 Points)
Replied 17 March 2009

and yes thanks guys for replies

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SANJAY KUMAR (DGM) (21 Points)
Replied 13 February 2010

I HAVE PPF ACCOUNTS IN THE NAME OF MY MINOR SON AND MINOR DAUGHTER. MY QUESTION IS FOLLOWING:-

IS IT LEGALLY CORRECT?
CAN I DEPOSIT RS 70,000/- IN EACH ACCOUNT EVERY FINANCIAL YEAR OR IS IT RESTRICTED TO COMBINED 70,000/- FOR BOTH?
POST OFFICE AT JAIPUR IS REFUSING TO DEPOSIT MORE THAN 70,000/- (COMBIED FOR BOTH). ARE THEY CORRECT?

SANJAY KUMAR

urvi shah (rm) (22 Points)
Replied 30 July 2010

Originally posted by : SANJAY KUMAR
	I HAVE PPF ACCOUNTS IN THE NAME OF MY MINOR SON AND MINOR DAUGHTER. MY QUESTION IS FOLLOWING:- IS IT LEGALLY CORRECT? CAN I DEPOSIT RS 70,000/- IN EACH ACCOUNT EVERY FINANCIAL YEAR OR IS IT RESTRICTED TO COMBINED 70,000/- FOR BOTH? POST OFFICE AT JAIPUR IS REFUSING TO DEPOSIT MORE THAN 70,000/- (COMBIED FOR BOTH). ARE THEY CORRECT? SANJAY KUMAR

Manoj BG (Tax Professional and in Service) (1795 Points)
Replied 31 July 2010

DEAR SANJAY,

IT IS LEGALLY CORRECT THAT U MAY GIFT U'R SON/ DAUGHETR A SUM AMOUNT OF Rs. FOR INVESTMENT PURPOSE. HOWEVER, U HAVE TO COMPLIED WITH OTHER PROVISIONS OF THE IT ACT AS BELOW.

AS PER PPF RULES, U ARE ALLOWED TO DEPOSIT IN PPF ACCOUNT MAXIMUM TO RS. 70,000 PER YEAR PER PERSON. THERE IS NO SUCH RESTRICTION UNDER 80C ABOUT THE MAXIMUM AMOUNT ALLOWED FOR PPF DEDUCTION HOWEVER SUBJECT TO THE MAXIMUM DED UNDER ALL THE AVENUES UNDER SEC 80C TO RS.100,000. THUS, EVEN IF U WILLING TO DEPOSIT, PPF AUTHORITIES WOULD NOT ACCEPT MORE THAN 70000 IN A YEAR FOR EACH PERSON.

SECONDALY, INTEREST ON PPF IS EXEMPT UNDER SECTION 10(15) OF THE INCOME TAX ACT.

U/S 80C, U R ALLOWED TO GET DEDUCTION FOR ONLY AMOUNT THAT U INVESTED IN YOUR NAME.

GIFT GIVEN TO RELATIVE IS FULLY EXEMPT FROM TAX. HOWEVER, INCOME OF MINOR SON (IN U'R CASE) WOULD BE TAXED IN HANDS OF PARENTS WHOSE TOTAL INCOME (BEFORE CLUBBING MINOR'S INCOME) IS GREATER U/S 64(1A).

UNDER SECTION 10(32), DEDUCTION ALLOWABLE FOR Rs.1500 TO THE PARENT IN WHOSE INCOME, THE INCOME OF MINOR IS CLUBBED.

IN YOUR CASE, INCOME OF THE MINOR IS PPF INTEREST WHICH IS EXEMPT UNDER SECTION 10(15) OF THE INCOME TAX ACT. THUS, MINOR'S INCOME WOULD NOT GET TAXED IN HANDS OF PARENT.

REGARDS,

MANOJ