Your Taxes

My son is an NRI. He deposited ₹1.5 lakh in PPF account in India during April 2017 for claiming IT relief u/s 80C for the Assessment Year 2018-19. But through your column dated 04.12.2017, I understand that as per a recent notification, PPF a/c of NRIs will be deemed closed and only SB a/c interest will be paid.

Kindly enlighten me as to when this notification came out and whether it is applicable prospectively or retrospectively.

Is my son eligible to claim relief u/s 80C for the deposit already made? Does he have to close the account? What are other options available for NRIs to get relief u/s 80C?

M Palaniswamy

The Public Provident Fund Scheme, 1968 (PPF) does not permit Non-Resident Indians (NRI) to open a PPF account. However, individuals who opened the PPF account as residents and subsequently became non-resident were allowed to invest till maturity.

Recently, the Government of India issued a notification that the PPF account shall be deemed to be closed with effect from the day the account holders become non-resident.

Further, the accumulated amount in such accounts will earn interest at the rate applicable to Post Office Savings Account, which is presently 4 per cent. This notification comes into effect from October 4, 2017. Since you have stated that your son is an NRI, the provisions of the notification would be applicable from October 4, 2017, and the PPF account is deemed to be closed.

Accordingly, the amount deposited in the PPF account will not be eligible for deduction under section 80C of the Income Tax Act, 1961.

Section 80C of the Act allows deduction from gross total income certain investments/contributions/payments made during the year subject to a maximum of ₹1.5 lakh. Some of the eligible contributions for deduction are: subscription to equity linked savings scheme, deposits with banks under five-year tax saving fixed deposits, payment of premium on life insurance policy, etc.

I am regularly depositing a part of my salary in my mother’s account . She in turn puts these sums in a fixed deposit in our joint names. She is a senior citizen. She is also getting family pension.

Will the interest on these fixed deposits be taxed in my hands or in my mother’s?

Gopa Kumar

Gifts in excess of ₹50,000 are generally taxable in the hands of the recipient, except under specific circumstances. One such condition for exemption is when the gifts are made to relatives.

The term ‘relative’ as per section 56 of the Act includes son and mother. Therefore deposits made by you in your mother’s account are not taxable in either of your hands. Clubbing provisions will not be attracted, as transfer of assets without consideration between son and mother is not covered within the purview of section 64 of the Act.

Accordingly, interest earned on the fixed deposits from your contribution will be taxed only in her hands.

The writer is Partner , Deloitte India. Send your queries to

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