HUF can claim deduction on PPF of any member

  • The Income-tax Act does not define ‘member’ of an HUF, so it would be guided by the principles of the Hindu law
  • You should be eligible to claim the standard deduction of 40,000 from such pension income (taxable in the nature of salary) for FY19, irrespective of your residential status

I am the karta of a Hindu Undivided Family (HUF). I have a daughter and a son and both are married and have children of their own. If my HUF deposits money in grandchildren’s Public Provident Fund (PPF) account, then would my HUF be able to claim tax exemption as they are the children of the coparceners?

—C.K. Gupta

As per Section 80C of the Income-tax Act, 1961, an HUF can claim deduction towards contribution to a PPF account, standing in the name of any “member" thereof.

The Act, however, does not define the term “member" of an HUF. Hence, this would be guided by the general principles of the Hindu law, with respect to inclusion of children of married sons or daughters as “members" of the HUF. You may also refer to the income tax website for guidance in this regard.

I worked for a government organization from 1958-1995 and retired as a civil servant. I have been a US citizen since 2010. I am an NRI. During FY19, I received pension of 11 lakh from the Indian government. My pension got enhanced by 20% as I crossed 80 years of age. I do not have any income in the US. Will I get the standard deduction and super senior citizen status for income tax purposes, now that I have got 20% increment in pension as a super senior citizen?

—U.R.K. Rao

From an income tax perspective, the uncommuted pension income received by you from the government, owing to your past employment, would be taxable in your hands under the head “income from salaries". The standard deduction of 40,000 is available to any individual earning “income from salaries", without any further conditions. Hence, you should be eligible to claim the standard deduction of 40,000 from such pension income (taxable in the nature of salary) for FY19, irrespective of your residential status. The standard deduction has been enhanced to 50,000 from FY20 onwards.

However, the benefit of higher basic exemption limit of 5 lakh, which is available to a super senior citizen, is only available where the individual qualifies as a resident of India. Where an individual qualifies as an NRI, irrespective of the age, the basic exemption limit shall be 2.5 lakh only. Hence, as you qualify as an NRI for FY19, your basic exemption limit shall be 2.5 lakh.

The eligibility for enhancement of your pension by 20% where the age of the individual exceeds 80 years may be verified separately.

Parizad Sirwalla is partner and head, global mobility services, tax, KPMG in India. Queries and views at mintmoney@livemint.com

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