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Investor
guidance
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by A.N. Shanbhag
Individual can belong to many HUFs
Q: Please let us know how a HUF can be wound up? Can a person be a member of two HUFs? — A Bhardwaj A: HUF (Hindu undivided families) partition can be partial or total. Where only certain members separate from the family or only certain assets of HUF are distributed, it is considered as a partial partition. A partition can be claimed by any coparcener on any grounds. Such a claim has to be submitted to the ITO who must make an inquiry and find whether there has been a proper partition. After it is ascertained as proper, any of the ex-coparceners has the option to treat his share either in his individual capacity or as his own smaller HUF, if eligible. Sec. 171(9) does not recognise partial partitions w.e.f. December 31, 1978. Unless the partition takes place by metes and bounds, the income earned by the recipients, whether individuals or smaller HUFs, would be deemed to be that of the bigger HUF. Secs. 171(4 & 7) show that a total partition does not imply a complete disintegration of the parent family into individuals, for they refer to the tax liabilities of ‘each member or group of members’ in the event of a partition. The total partition visualised by Sec. 171(9) is the total partition of the family properties among the main groups entitled to them and not among all lineal descendants who are coparceners, much less among ladies who become eligible for a share only in the event of their husbands’ effecting a partition in their respective families. An individual can belong to several HUFs.
May 13 amendment
Q: My PPF account of HUF has completed 15 years as on April 1, 2005. Can it be extended for a period of five years from April 1, 2005 post amendment dated May 13, 2005. — Gupta A: An excellent query. The related amendment prohibits an individual to subscribe to the fund on behalf of HUF either from his own income or from the income of HUF with effect from May 13, 2005. These amendments shall not be applicable to the existing accounts opened in accordance with the rules in operation prior to the amendments dated May 13, 2005. These shall continue till maturity and deposits/withdrawals in/from these accounts shall be allowed to be made in accordance with the said rules. However, any extension of existing accounts shall be subject to the amendments dated May 13, 2005. It is my considered opinion that all accounts whether in the name of HUF or otherwise, stand extended at the end of its term of 15 years. If the account holder desires to extend it with contributions, he has to file Form-H either before or along with his contribution for the first year of extension. If the form is not filed, the accountholder has the right to withdraw 100 per cent of the amount standing to his credit in one or more installments, but only one per year. In view of all this, an HUF account whose first term has ended on April 1, 2005, stands extended in accordance with the rules in operation prior to the amendments dated May 13, 2005, unless the account holder has closed the account by withdrawing 100 per cent of the balance in the account on or before May 13, 2005. It stands in the extended even if a part of the amount is withdrawn. If the account holder desires to make any contributions, he has to file Form-H. Needless to observe that HUF accounts expiring on April 1, 2006 have to be necessarily closed. If not closed, the corpus will not attract any interest beyond that period. Yes, this is my opinion but the possibility of different account offices taking different views cannot be lost sight of. The authorities will do well by issuing a circular or notification on this subject.
IT circle
Q: In which circle should I file my IT return? I was a PSU employee earlier, filing in salary circle. Now after getting relieved under VRS, I am getting remuneration as consultancy fees where TDS is being deducted. I have a PAN and have to claim refund of TDS deducted. — Rana A: The circle would depend upon your address. The jurisdiction of the income tax office where the return for professional income is to be filed varies as per the address of the assessee. Please consult the local PRO at the Income Tax office who would guide you regarding the same.
Section 80C
Q: My question is about the new Section 80C. If I invest Rs 1 lakh allowed in any ELSS (Equity Linked Savings Scheme) in the name of minor son, would I get the benefit of the deductions under the section? In the case of PPF or even life insurance premiums, the same is allowed. What about ELSS? — Niyogi A: Under Section 80C, if an individual invests in either his name or the name of the spouse or any child, major or minor, deduction can be availed of in the case of investments in the form of life insurance premium, PPF and ULIP. Of course, the amount of deduction etc. is subject to the rules of the individual investment products.
FBT on LTA
Q: Is the LTA paid to employee taxable as fringe benefit tax in the hands of employer? — Nilesh A: Fringe benefits exclude those allowances and perks on which tax is paid or payable by the employee. My opinion is that LTA, HRA etc. are indeed perks and allowances on which tax is payable by the employee. A part of the same is specifically exempted by the Income Tax Act itself. In other words, these are not “fringe benefits” escaping tax but “express benefits” allowed to escape tax by the lawmakers themselves. Why would one hand of the law seek to offer an exemption while the other hand seeks to tax the same amount? It is illogical. In any case, a clarification from CBDT would be welcome.
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