The Hindu : Business : Deposit scheme for IT benefit notified

Online edition of India's National Newspaper
Tuesday, Aug 01, 2006

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Business

Deposit scheme for IT benefit notified

Special Correspondent

Overall ceiling of Rs. 1 lakh fixed for tax purposes

NEW DELHI: The Union Government on Monday notified the Bank Term Deposit Scheme, 2006, for the purpose of Sec. 80C (2)(xxi) of the Income-tax Act.

Under the scheme, an individual or a Hindu undivided family (HUF) can invest in term deposits of a scheduled bank up to Rs. 1 lakh in a year. However, the investment in these term deposits, along with investments in other saving schemes, will be subject to the overall ceiling of Rs. 1 lakh for the purpose of tax benefit under Sec. 80C.

According to an official statement here, the term deposit may be of two types, that is, single holder type or joint holder type deposit. In the case of joint holder type deposit, the tax benefit under Sec. 80C will be available only to the first holder of the deposit. The maturity period of the term deposit should be five years. In effect, no term deposit can be encashed before the expiry of five years from the date of investment. The rate of interest on the term deposit will be in accordance with the rate fixed by the scheduled bank from time to time. Interest on the term deposit shall be liable to tax either on accrual or on receipt basis, depending on the method of accounting followed by the investor, the statement said.

New Form 10BB

Any fund, trust, institution (both educational and medical), university or hospital claiming income-tax (IT) exemption will have to get the accounts audited if its total income in that year exceeds the maximum amount not chargeable to tax.

Under the Taxation Laws (Amendment) Act, 2006 enacted on July 13, it has become mandatory for such institutions enjoying exemption under sub-clauses (iv), (v), (vi) and (via) of Section 10(23C) of the IT Act, 1961 to get the accounts audited if their total income during any year, without giving effect to the provisions of the sub-clauses, is more than the maximum amount not chargeable to tax.

The Government has notified the audit report for this purpose vide new `Form 10BB' in the Income-tax Rules, 1962. The new form is applicable from the assessment year 2006-07 onwards, an official statement said here on Monday.

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