I’m working with a multi-national firm (MNC) and my Public Provident Fund (PPF) contribution is round ₹5 lakh. Can I open separate PPF accounts for my two minor youngsters? Will the curiosity on these PPF accounts be clubbed with my earnings and is it taxable? Additionally, my spouse is a physician and contributes ₹1.5 lakh in direction of her PPF account. How can we handle investments in PPF ?
— Identify withheld on request
We presume that you’re presently contributing roughly ₹5 lakh each year as worker contribution in direction of Worker Provident Fund (EPF) account, and to not the PPF account (as talked about in your question) by the use of deduction out of your wage.
Thus, the utmost threshold restrict (presently ₹1.50 lakh) of deduction beneath part 80C of the Earnings-tax (I-T) Act, 1961, is already exhausted, therefore, no additional tax deduction could be obtainable for a contribution in direction of PPF.
Moreover, earnings earned on the worker contribution to EPF in extra of ₹2.50 lakh (i.e., contribution of ₹5 lakh minus ₹2.50 lakh) shall even be taxable in your fingers as per guidelines for taxation relevant to earnings from different sources.
Please notice that as per the Public Provident Fund Scheme, 2019, a person might open PPF accounts of their title, in addition to within the title of every minor youngster. Thus, you might open the PPF accounts for each your minor youngsters. As per the scheme, PPF deposit by a person is capped at ₹1.50 lakh each year. Contributions made in minor’s account are additionally clubbed within the mentioned restrict. Therefore, whole contribution in all three PPF accounts (i.e., your and two minor accounts) shall be capped at general restrict of ₹1.50 lakh. The earnings earned from funding within the PPF account is exempt within the fingers of the person.
Additionally, it is very important notice that earnings earned by a minor youngster from the PPF account (besides in case of a minor youngster affected by a specified incapacity) will likely be clubbed and provided to tax within the fingers of the guardian whose earnings is greater. As per provisions of part 10(11) of the I-T Act, curiosity accrued in PPF account the place annual contribution doesn’t exceed ₹5 lakh shall not be taxable. Accordingly, curiosity accrued for the annual contributions (as much as ₹1.50 lakh) shall be exempt in your fingers (together with curiosity on minor PPF accounts which is clubbed in your fingers, assuming you’re the higher-earning partner). You will want to appropriately disclose your complete PPF curiosity as exempt earnings in your private tax return.
Additional, your spouse, being a separate taxpayer, might proceed to deposit ₹1.50 lakh in her PPF account from her private earnings. Curiosity earnings accrued from her deposits shall be required to be reported in her private tax return appropriately as exempt earnings.
Parizad Sirwalla is partnerand head, world mobility providers, tax, KPMG in India.
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