SC Vasudeva
Q. I am a disabled military officer retired from the post of Colonel. I am receiving pension from which tax is being deducted at source by the bank. While deducting tax at source, the bank did not consider my disability element. On my request, the bank furnished me the details of my monthly pension which includes basic pension as well as my disability pension.
The CBDT vide F.No. 200/51/99-IT.AI dated 2.7.2001 has clarified that entire disability pension i.e. “disability element” and “service element” of a disabled officer of the Indian Armed Forces continues to be exempt from income tax.
Please clarify the term “service element”, whether my entire pension is exempt from tax, if not, what is my tax liability. I am a senior citizen.
— Col (retd) Raghvendra Singh
A. In accordance with the circular No. F.No. 200/51/99-ITA-I dated May 6, 2000, the entire disability pension admissible to Armed Forces Personnel is exempt from tax. The service element in my opinion would mean the pension attributable to the service period. You can, therefore, approach the tax department for the allowance of the refund of tax at source deducted by the bank while making the payment of your pension. You will thus have to file the return of income for the relevant year for seeking refund of tax deduction at source.
Q. I am maintaining a PPF A/c with Post Office, maturing on 31.03.2016. I intend to extend the period for further five years. My queries are:
1. How much amount can be withdrawn before the period is extended?
2. What is the procedure for availing the option of five years?
3. Can I also withdraw part of the amount during option period? If yes, when and how much?
4. Till date, no withdrawal has been made.
5. What is the tax liability on withdrawal?
— Rajender Kumar
A. 1. In the event of a subscriber opting to subscribe for a further block period of five years after the expiry of 15 years from the end of the year in which the initial subscription was made, a subscriber is entitled to make partial withdrawals not exceeding one every year by applying to the accounts office in Form C or as near thereto as possible, subject to the condition the total withdrawals during the five-year block period, shall not exceed 60% of the balance at the credit of the subscriber, at the commencement of the said period.
2. The application in Form-H is required to be filed for an extension for a further block period of five years.
3. There is no tax liability in respect of the amount withdrawn from PPF.
Q. An Indian (Now British national and settled in the UK) wants to give around 5,000 pounds to a family in India.
a) What is the most effective way of doing so which has least or no tax implications under Indian tax laws?
b) If above is not possible, what is the best way for him to park these funds with the family or in a company owned by the family so that these funds can be used here. In that case, what permissions are to be sought from Indian authorities?
— OP Gupta
A. (a) Any amount of gift received by an Indian who is not relative of the donee in terms of Section 56 of the Income-tax Act 1961 (The Act), will be taxable in the hands of the donee if the amount is in excess of Rs 50,000 in a year. The query does not indicate the nature of relationship and therefore it is not possible to explain the position of taxability in the hands of the recipient.
(b) In case the relationship is not covered within the definition of the term ‘relative’ as specified in the aforesaid section, the amount can be given as a loan to the family through the medium of Non Resident Ordinary Account. The amount received back can be deposited in such rupee account. It may be added that amount deposited in NRO account is normally not repatriable. No approval of the income-tax authority is required for the grant of such a loan.
