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If I gift or transfer by cheque three fourths of my superannuation benefits to my wife and children (who are majors), what would be the tax implications for me and the recipients?
KP Nair
According to Section 10(13) of the Income Tax Act, 1961 (“the Act”), any payment from an approved superannuation fund is exempt in the hands of the recipient, provided the same is received under the circumstances specified in the Section, that is, death, retirement or incapacitation.
In case, the fund receipt is for instances other than those specified, the withdrawal would be wholly taxable in your hands.
When you transfer the benefit as a gift to your spouse and children, it would be classified as a gift from a relative and would be tax exempt according to the provisions of Section 56(2) of the Act.
I got my 80C benefit by way of life insurance and PPF. I wish to also open a PPF account for my granddaughter who is 16. I will be depositing ₹1.5 lakh in her account but will not be claiming tax benefit for the same.
When the 15-year period is over, she can make tax-free claim on it as she will be a major then.
Can I go ahead with this arrangement?
Latha
From the facts provided, we understand that there are two aspects to your query. First, whether you can open a PPF account in your granddaughter’s name and, second, if it will be tax-free in her hands after the 15-year period is over, that is, on maturity.
According to the Public Provident Fund Scheme (Amendment) Rules, 2014, you would be able to open a PPF account in the name of your granddaughter only if you are her legal guardian.
In other instances, her parents should be able to open an account on her behalf.
Further, according to the regulations, the total investment by an individual in a year is capped at ₹1.5 lakh.
It is not clear whether you could contribute ₹1.5 lakh as guardian. P
erhaps, you can confirm the same with the bank/post office.
With respect to the tax implication for your granddaughter on maturity of the PPF account, the maturity proceeds would be tax-free as laid down in Section 10(11) of the Income Tax Act, 1961.
The writer is Partner, Deloitte, Haskins and Sells LLP. Send your queries to taxtalk@thehindu.co.in
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