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T Banusekar

THE tax on my total income after reducing the eligible rebate for which I have made investments under Section 88 amounts to Rs 150. The total income includes a sum of Rs 72,000 (after reducing the deduction available under Section 80L) being interest from bank deposits. I have given a form 15H to my banker stating that my tax liability will be only Rs 150, and requested that tax be deductedt only to the extent of Rs 150.

The banker, however, has deducted tax at source on the entire interest income at 10 per cent (increased by a surcharge). On checking with my banker, he informed me that if my income exceeds Rs 50,000, tax would have to be deducted at source on the entire interest. Is this correct?

Nigam

Reply

The banker is correct in deducting tax at source on the interest at 10 per cent (as increased by a surcharge) if there is a tax liability that is owed to the extent of Rs 150. Form 15H may be issued by a person who is in receipt of interest or income in respect of units without deduction of tax at source. Paragraph 3 of this form requires the declarant to state that the income on the estimated total income including the interest income and/or income in respect of units in respect of which this form is being issued will be Nil.

It would not be open in cases where there is a tax liability to give a declaration in form 15H requiring the payer to deduct tax at source only to the extent of such tax liability owed by the payee. In such cases, the payee may approach the assessing officer under Section 197 for the issue of a certificate of lower rate of deduction of tax at source.

Query

The Finance Bill-2002 proposes to restrict the rebate under Section 88 where the income exceeds a specified figure. How is this rebate computed and what is to be taken as income for this purpose?

Sajith

Reply

Section 88 providing rebate for individual assessees and HUFs is sought to be amended to reduce the rebate in the case of high-income assessees. The amendment seeks to provide that the deduction would be available as in the Table:

The term, `gross total income' means the aggregate chargeable income under all the five heads of income, as increased by the income of other persons to be clubbed in the hands of the assessee and the sums to be aggregated under Sections 68 to 69D. This income may be reduced to adjust the losses of this year, and the brought-forward losses to be set off.

Query

The Finance Bill-2002 proposes to introduce service tax on life insurance premium collected by the LIC and other insurers. Will the service tax paid by an individual also qualify for rebate under Section 88?

Tarun Kulshrestha

Reply

It is possible to claim the rebate even in respect of the service tax paid on the insurance premium, as this will be "a sum paid to effect or keeping force an insurance".

The rebate is available under Section 88 in respect of "sums paid to effect or keep in force an insurance":

(a) If the assessee is an individual, such individual, spouse or any child of such individual;

(b) If the assessee is a HUF, any member thereof.

Query

An individual remits Rs 60,000 in the PPF account in his name. The HUF of which he is a member also invests Rs 60,000 in the PPF account. Will interest be paid as per the revised PPF scheme on both the accounts?

Rajkumar Gupta

Reply

The reader can continue to invest in the PPF account in his individual name and in the name of his HUF and use the rebate and the interest in respect of each such investment, up to a maximum limit of Rs 60,000 in the respective assessments.

The Centre has amended the PPF Scheme through G.S.R. 908(E) dated December 6, 2000. The application form, under the Form A issued through G.S.R. 908(E) makes it clear that no interest will be paid to a subscriber on the deposits made in excess of Rs 60,000 in a financial year.

In computing this limit, only the deposits made in the following names need to be aggregated:

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