I am a 65-year-old retired employee. I have deposited more than `10 lakh in fixed deposit (FD). The interest earned on the FD is being credited monthly/quarterly in my savings bank account with the same bank. Since I am not an income-tax assessee as per my yearly income, I have submitted the requ-ired Form No. 15 to the bank seeking exemption from tax deduction at source. Inspite of this, the bank is deducting the tax at source but refunding back the deducted amou-nt later on. When I sought clarification, an official told me that as per a new rule, the bank from this FY has to deduct the tax at source on deposits of more than `10 lakh but will refund it later on.
Radheshyam Pareek
Via e-mail,

Sections 197 A (1) and 197 A (1A) provides that no tax deduction shall be made by the deductor in case the payee furnishes to the person responsible for paying any such income a declaration in writing to the effect that the tax on his estimated total income of the previous year in which such income is to be included in computing his total income will be nil. Such declarations will not be entertained, where the aggregate amount of income liable for TDS exceeds basic exemption limit. Further, Section 197 A (1C) provides that senior citizens can file the declarations referred above irrespective of the gross amount received. Therefore, the deduction of tax on interest by the banker even after receiving the declaration from a senior citizen is not correct.

Moreover, certain responsibilities are attached on the deductor towards deduction of tax. Once deduction is made, the amount so deducted shall be remitted to the credit of the central government:
* In respect of tax deduction made on the amount paid or credited to the account of the payee, one week from the last day of the month when such deduction was made;
* If credit entry has been passed in the books of the payer on the last day of the financial year based on accrual system of accounting, two months from the expiration of such last day of the financial year.

I have been told that Section 80C of the Income-Tax Act allows deductions of contributions made by any individual towards public provident fund scheme from the total income for the financial year. In the explanations, the section clarifies that even contributions made by an individual to PPF not only in his name but also in the names of his spouse and any child of the individual is allowed as deduction.

Please clarify if such deduction is allowed for contribution to PPF made in names of children, who are earning adults and married too.
L.L. Kumar, Via e-mail,

Under Section 80C, contributions to Public Provident Scheme, 1968, in case of an individual can be made in an account standing in the name of the individual, the wife/ husband of such individual and any child of such individual are eligible for deduction.

Child means major/minor son/daughter, married or unmarried son/daughter. However, care needs to be taken that the amount of investment/contribution to be made during each financial year cannot exceed `70,000 under this scheme.

(Kamal Rathi is a chatered accountant, representing Rathi & Malani, a Hydeabad based accounting firm. Readers can mail their queries on income tax tokamalrathi.ca@gmail.
com)