I am retiring on November 30, 2016. My PF balance will be around ₹65 lakh. Will there be any tax implication on the receipt of this sum? I plan to invest the entire amount in fixed deposits.

With FD interest being taxable, can I gift 50 per cent of the PF amount to my wife (who has no sources of income) so that she can invest, thereby saving on taxes?

M Narain

According to the Income Tax Act, 1961, accumulated balance of a recognised provident fund (PF) of an employee due and becoming payable upon retirement, is exempt from tax if the employee has rendered continuous services for a period of five years or more with his employer.

While computing the period of continuous service, the period of service rendered with the former employer is also considered if the employee has transferred the amount lying in his PF account maintained with the previous employer to the current PF account.

I am assuming that you have already completed five years of continuous service before retirement and have been contributing to recognised PF account. Thus, the entire amount (including accrued interest income) is exempt from tax.

In case you transfer funds to your wife’s account, the interest income to be earned by your wife from fixed deposits shall be clubbed with your own income and thus taxable in your hands.

However, any further income received by your wife on investment of the fixed deposit interest (which was clubbed and taxed in your hands) shall be taxable as your wife’s income for the respective period.

I filed my tax return for this year on time and paid all the taxes due. But I have got an email intimation under Section 143(1) from the tax department, claiming more taxes.

According to the intimation, there seems to be a mismatch in my TDS claims vis-à-vis the TDS amount considered by them.

I understand that the online intimation u/s 143(1) received by you is showing tax payable only on account of the mismatch of the tax deducted at source (TDS) credits claimed in the tax return vis-à-vis TDS credits considered by the tax department and there is no mismatch of the income.

I would suggest you first verify your Form 26AS for the concerned financial year to reconfirm whether all the TDS credits are appropriately reflecting therein.

In case they are, you need to file an online rectification request for re-processing the tax return.

In case the TDS credits do not reflect completely in your Form 26AS, then you should get in touch with the deductor to revise the quarterly withholding tax returns and once the same is revised, file an online rectification request against the intimation u/s 143(1) to rectify the demand.

Also, obtain the corrected Form 16/16A from the deductor for your records.

The writer is a practising chartered accountant. Send your queries to taxtalk@thehindu.co.in

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