The Hindu Business Line : Is post-office MIS interest taxable?

I have got interest from the post-office monthly income scheme (MIS). Is it taxable? I have also made deposits under cumulative deposit schemes. They have not deducted tax at source as. Am I required to disclose it as my income on accrual ba sis?

Ramani P. Easwaran, email

With the abolition of Section 80L, the tax benefit for interest under post office MIS has gone. You will have to include the same as your income from other sources. As for interest under cumulative deposit schemes, you have the choice of paying tax on accrual basis or when the interest actually becomes payable to you in terms of the scheme of deposit.

Borrowing PAN

I am a financier with PAN. But I want to bid in an auction entailing an investment of Rs 10 lakh borrowing the PAN of Shyam for which service I am going to pay him PAN hire charges and interest on the condition that he would have to make ov er the net proceeds to me after the entire transaction is over. Would this be okay with the income-tax department? Of course I would be paying the tax on the profit.

Ram, email

This could be laughed off as a Ram-aur-Shyam or a cock-and-bull story by lay readers but the department is certainly not going to be amused. Prima facie, it appears that you don’t want to come upfront in the bidding process fo r some reason.

I am afraid despite your offer to pay up the taxes, the department would call upon Shyam to pay the tax and would not be interested in how he applied his income even if he were to handover the entire proceeds to you less interest and hire charges for PAN.

Incidentally, trafficking in PAN would be illegal. At any rate, payment of hire charges would not divert the income of Shyam, the name lender, to you, so as to buttress the case for diversion of income by him to you. The arrangement cannot pass muster as a genuine partnership either because there is no agreement to share profits, the sine qua non of any legal partnership agreement.

S. MURLIDHARAN
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