BY CA. NARESH JAKHOTIA (Chartered Accountant)
Query 1]
I am 76 years of age and would have only the contributions to the PPF A/c as the category of investment eligible for Deductions U/c 80C, as the benefit of deduction on the Investments made in ELSS is proposed to be withdrawn from 1st April, 2012. I wish to contribute Rs. 30,000/- to the PPF A/c of my Spouse to claim the full benefit of Rs. 1 Lacs U/s 80C. However, I need clarifications and guidance with regards to:
1. Whether the contributions made to the PPF A/c of the Spouse will be treated as ‘Gift, and/or, attract the ‘Clubbing provisions’ as per the New Direct Tax Code, being introduced from 1st April, 2012?
2. If the ‘Clubbing provisions’ are applicable, whether the Interest credited every year on such contributions, on ‘cumulative basis’, is to be added to my income, as ‘tax-free Income’, every year?
3. Whether a written consent of the Spouse to the contributions made by me to her the PPF A/c is needed, and is to be retained along with the ‘Original’ Pay-in-slip in my Income-Tax records, for future reference?
4. Whether the Original Documents, referred above, are to be retained in the Income-Tax record of the Spouse and only the Copies are to be retained in my Income-Tax records?
I hope that you will guide me and the readers of the tax-talk, by publishing the reply in Hitavada, at an early date. []
1. If any individual decides to deposit amount in the PPF account of a spouse, the investment shall be eligible for deduction u/s 80C(2)(v) read with Section 80C(4) of the Income Tax Act-1961. Such contribution / deposit could either be treated by the depositor as Gift or as Loan. In either case, the clubbing provisions under section 64 of the present Income Tax Act-1961 applies in respect of deposit in the account of Spouse. However, there is nothing to worry about as the interest on PPF is exempt u/s 10 and no tax liability arises in the hands of the Depositor. On maturity of PPF account, if the amount is reinvested somewhere else by the named account holder, the clubbing provisions becomes applicable. The new proposed Direct Tax Code also have incorporated the clubbing provision as is contained in the Income Tax Act-1961. Section 9 of the proposed Direct Tax code proposed to club the income of the spouse from the assets transferred without consideration in the hands of the transferor.The Good news: Government has recently increased the Annual Investment ceiling in PPF A/c to Rs. 1,00,000/- from the present limit of Rs. 70,000/- .
2. Yes, the interest income on cumulative basis has to be clubbed every year and the same can be claimed as exempt u/s 10.
3. The written consent is not necessarily required as such. However, documentary evidence as to the payment should be kept to justify the deduction in the account of the Payer.
4. The original documents should be kept in the records of the person paying & claiming the deductions.
Query 2]
I had purchased a flat in the year 2002 for Rs.6,00,000/- and I am selling it now (2011) for Rs.11,50,000/-. The Govt. ready reckoner value of the flat is Rs.24,00,000/-. What will be my tax liability? How capital gain will be calculated?
1. To be undisputable & as per the normal rule, the capital gain is required to be computed by taking the Government Ready reckoner valuation of Rs. 24 Lacs, even though the actual sale consideration is Rs. 11.50 Lacs. [Section 50C(1) of the Income Tax Act-1961].
In your case, there is a vast difference between the actual sale consideration vis a vis Government Ready Reckoner Value. In such a case, U/s 50C(2), you can file your return of income by claiming the sale consideration as Rs. 11.50 Lacs as full value consideration. In such case, the Assessing Officer may refer the valuation to the Departmental Valuation Officer (DVO). If the value assessed by the DVO exceeds RS. 24 Lacs, capital gain would be required to be computed by taking the valuation of Rs. 24 Lacs. If however the valuation done by the Departmental Valuation Officer is lower than Rs. 24 Lacs, then the valuation shown by the DVO will be adopted as sale consideration in place of actual sale consideration shown by the assessee in the sale deeds.
In the absence of all the relevant information like date of purchase, purchase expenses etc, the amount of capital gain & tax thereon cannot be worked out.


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