Business   

Alternate nomination is not provided for

QUESTION: Is it possible to have alternate nominees as is normal in other cases of nomination, so that in case, where first nominee predeceases the depositor, second nominee may be paid?

ANSWER: Application form providing for more than one nomination indicates the share of each nominee. Though the form does not provide for alternate nominees, it should be possible by other suitable instructions, because it is only the Nomination Form and not the scheme that requires such specification of shares. But in such cases, it is better that such nomination as desired is got approved, so as to avoid invalidation of nomination itself.

Senior citizens

Q: I have opened an account in one of the reputed public sector banks under Senior Citizens Account Scheme. I had volunteered to file Form-15H, so as to avoid tax deduction at source as I understood, that interest may be liable for tax deduction at source. I am informed by the bank that while they are obliged to deduct tax, they have no instructions as yet for acceptance of Form 15-H in respect of interest paid on such accounts, where it exceeds the limit of Rs. 5,000. Kindly clarify the position of law in this regard. What is the position as regards relief under Sec. 80L?

A: Interest from the deposits under the Senior Citizens Account Scheme is not exempt from tax. It has not even been notified for deduction under Sec. 80L, unless one takes a liberal view, that it would be covered by interest from deposits with any bank.

No doubt, as regards amount deposited in Post Office only interest on deposits under Post Office Monthly Income Account Rules, 1987 is eligible for deduction under section 80L. Such deposits with banks on such distinctive schemes may not be eligible for Sec. 80L relief unless notified. But it is not unlikely that it may be either notified or clarified for relief under Sec. 80L in future.

As regards tax deduction at source, Sec. 194A covers any payment of interest other than income by way of interest on securities by any person. Sec. 194A(3)(vi), however, would spare tax deduction in respect of any deposit under any scheme framed by the Central Government and notified by it in this behalf in the official gazette. There has yet been no notification. No doubt, deposits with banks other than time deposits are not liable for tax deduction at source, so that interest on recurring deposits account has been treated as not liable for tax deduction at source. In the case of Senior Citizens Account Scheme, as noted earlier, it may not be treated as a deposit with the bank and even if it is so treated, it will not be a time deposit, so that tax deduction may not be avoidable.

If tax is deducted, it can only be under Sec. 194A so that the right to file self-declaration under Sec. 197A(1C) would certainly be applicable. Sec. 194A(1C) provides that a person of the age of 65 years or more can furnish a declaration in the prescribed Form, which for senior citizen is Form 15H, to the effect that tax that on his estimated total income for the previous year will be nil. The revised Form 15H with effect from August 1, 2003 is applicable only for senior citizens. This distinct form has become necessary because in the case of others such self declaration cannot be filed, if the aggregate of such interest income along with interest on securities, income from mutual funds under Sec. 194K where it is taxable and withdrawal from National Savings Scheme, 1987 exceeds Rs. 50,000. There is no such upper ceiling in matter of certification for senior citizens.

If the reader is able to explain to the responsible persons in the bank that Form 15H is bound to be acted upon by law, tax deduction and the consequent hassles for the readers as well as others similarly placed could be avoided.

S. Rajaratnam

Printer friendly page  
Send this article to Friends by E-Mail

Business

News: Front Page | National | Tamil Nadu | Andhra Pradesh | Karnataka | Kerala | New Delhi | Other States | International | Opinion | Business | Sport | Miscellaneous | Engagements |
Advts: Classifieds | Employment | Updates: Breaking News |

Stories in this Section

A constructive approach to budget exercise
More than a trade-off
Will FM present another dream budget?
Stocks end on a promising note
Alternate nomination is not provided for

Copyright © 2005, The Hindu. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu