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Senior citizenship not available for HUF income

QUESTION: I am a senior citizen as defined having reached the age of 65. I have submitted my 2C Form to the Income-tax Department. I was possessed of ancestral properties which I liquidated and converted them into some bank deposits and I am maintaining myself with the interest alone. I have not so far been assessed to tax. Does the income from ancestral properties on liquidation of which I get the bank interest qualify for concession. Will you please elucidate and clear my doubt?

ANSWER: The fact that there is income from ancestral properties does not necessarily mean that the income belongs to the Hindu Undivided Family (HUF). If the property belonged to the deceased Hindu in his individual capacity and he had died on or after June 17, 1956 on which date the Hindu Succession Act, 1956 had come into force, the property will only be his `individual' property. Tax on income from individual properties of a senior citizen will be eligible for tax rebate, under Sec. 88B to the extent of Rs. 15,000 raised from Rs. 10,000 from assessment year 2001-02. Income from joint family properties, even if it is under the stewardship of the karta, who is a senior citizen, is not eligible for tax rebate, because Sec. 88B applies only for individuals. It stands to reason that the HUF, which can exist only as a group of persons, cannot be said to have aged merely because one of the members has become a senior citizen. Even if all the members had become senior citizens, HUF itself cannot claim the status of senior citizenship, as it can only be claimed by individuals.

Provident Fund: Some unexpected advantages

Q: The Income-tax Act allows for deduction of amount paid on account of voluntary contribution for recognised PF up to Rs. 60,000 in order to obtain concession under Sec. 88. This contribution is immediately withdrawn by means of refundable/non-refundable loans as per PF guidelines. In the case of employees retiring during the year, the withdrawal is being done within a span of less than one month from the date of contribution. Whether the relief can be allowed in such cases and whether withdrawals would attract tax?

A: It is true that the amount deposited in a recognised provident fund immediately before retirement or immediately before maturity at the end of the 15th year or any extended block of five years gets tax rebate, though it can be withdrawn shortly after the right of withdrawal matures as in the case of recognised PF on retirement and in the case of PPF at the end of the period of 15 years/extended block of years. Withdrawals on that account do not attract tax. So are the other part-final withdrawals or loans. It may be possible that a person may get tax rebate when the deposit is made from chargeable income, while he may be able to get a loan or make part final withdrawal immediately, thereafter, without being taxable on such withdrawals. But the fact remains that earlier deposits get locked up till such time as withdrawal or maturity.

S. Rajaratnam

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