Whether HUF can claim deduction u/s 80C by investing in the PPF account of its members?

HUF-12




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Query 1]

We have read your informative article on “Date Extension of 31st March to 30th June 2020: Confusions & Clarification”. There is confusion among taxpayers as to how or whether, they can make investments in instruments like Public Provident Fund (PPF), NPS, National Savings Certificates (NSC), five-year Fixed Deposit to save tax even after March 31 to save tax for FY 2019-20? It is not clear if cut off investment date for all the tax-saving investments u/s 80C has been increased or not? Similarly, confusion is there regarding extension in date for voluntary contribution in Tier-1 Account of National Pension System (NPS) u/s 80CCD(1B), payment of health insurance premium u/s 80D as well as on making donations u/s 80G. To cite a specific example for desired clarity: –

Mr. X is yet to make his tax-saving investments for FY 2019-20 whereas Mr. Y has completed his investments for the said financial year. If both of them invest Rs 1 lakh each after the lockdown gets over, say on April 15, 2020. In that case, will the investments made on same day be treated differently for Mr. X and Mr. Y? For Mr. X, the investment made on April 15, 2020 will be treated as investment for FY 2019-20 and for Mr. Y, the investment made on same day be treated as investment for FY 2020-21? [anandi.poddar@yahoo.com]

 

Opinion:

New changes in law bring with it new set of permutations & combinations. The same is the case of present amendment whereby the date of investment has been extended from 31st March 2020 to 30th June 2020 for claiming deduction u/s 80C. It may be noted that,

  1. The investment done in between 1st April 2020 to 30th June 2020 can be treated as investment for the purpose of claiming deduction of FY 2019-20.
  2. It means that the person can make investments till 30.06.2020 i.e., after March 31st 2020 to claim deduction for the FY 2019-20.
  3. The cut-off date for investment of all the tax-saving investments
    a)  like PPF/ELSS,NSC etc u/s 80C
    b) for voluntary contribution in Tier-1 Account of National Pension System (NPS) u/s 80CCD(1B)
    c) payment of health insurance premium u/s 80D
    d)For making donations u/s 80G,
    has been very clearly extended by 3 months.
  4. On the Issue raised by you:
    If Mr. X is yet to make his tax-saving investments for FY 2019-20 whereas Mr. Y has completed his investments for the financial year and if both of them invest Rs. 1 lakh each after the lockdown gets over, say on April 15, 2020 then
    a) Even if the investments is made on same day, it will be treated differently for Mr. X and Mr. Y
    b) For Mr. X, the investment made on April 15 , 2020 be treated as investment for FY 2019-20 and
    c) for Mr. Y, the investment made on same day be treated as investment for FY 2020-21.

 

Query 2]

I am claiming deduction of Rs. 1.50 Lakh towards housing loan principal repayment and school fees payment of my children. I have not deposited Rs. 1.50 Lakh in my PPF Account for the FY 2019-20 due to lockdown. Through your column in the last week, I have come to know that the investment in the PPF account now can be done till 30.06.2020 for claiming relief u/s 80C

Since, I am already qualified for Rs. 1.50 Lakh deduction in my individual A/c, whether deduction u/s 80C can be claimed by HUF if it deposit the amount in the PPF account of any of its members? I have been told that the PPF account is not permissible in the name of the HUF now and so HUF cannot deposits the amount in the PPF account so as to claim deductions u/s 80C by virtue of Notification No. GSR 291(E) Dated 13th May, 2005? Please guide. [rao2319@gmail.com]

 Opinion:

  1. Notification No. GSR 291(E) Dated 13th May, 2005 was issued under PPF (Amendment) Scheme, 2005 to restrict the benefits of the scheme to individuals only. It is provided that accounts opened under any of the small savings scheme including Public Provident Fund Scheme, 1968 by other juristic persons like HUFs, trusts, etc. (persons other than individual) on or after 13th May, 2005 shall be treated as void ab-initio and immediate action was sought to close such accounts and to refund deposits without any interest to the depositors. What is prohibited by above notification is opening of PPF account in the name of HUF with effect from the above date.
  2. Now coming to the Income Tax Act-1961, it may be noted section 80C(4)(a)(ii) provides that in the case of HUF, the investment can be made in the name of any member of the HUF. In view of the specific provisions contained therein read with 80C (1) & 80C (2), it may be noted that an HUF is entitled to relief u/s 80C if the investment by HUF is done in the PPF accounts of any of its member. The above amendments do not override the provisions of the IT Act-1961.
  3. In short, there is no restrictions on HUF for making payment in the PPF A/c of its members for claiming deduction under section 80C.

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