The Hindu : Business : Accrued income, whether eligible for deduction u/s 80C?

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Monday, Aug 06, 2007
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Accrued income, whether eligible for deduction u/s 80C?

In Business Line dated May 20, 2007, under personal finance, it has been stated that the interest credited in PPF will also to be treated as an investment eligible for deduction under Sec. 80C. On

making a reference to local Tax Consultant, he is of the view that that may not be so, as in respect of PPF only an amount directly invested will be eligible and interest directly credited may not be qualified. In the case of NSC investments, the accrued interest is automatically eligible as specific mention has been made by the department and a similar provision has not been made in regard to the interest credited under PPF. Could you please give a clarification?

The reader is right in that, interest on investment from National Savings Certificates (NSC) accrued during the year, is deemed as reinvestment entitled to benefit of deduction under Sec. 80C vide Board Circular No. 654 dated July 22, 1993 (1993) 203 ITR (St.) 9.

Interest income from NSCs is taxable, while interest from Public Provident Fund (PPF) is exempt, so that reinvestment by way of one’s own undrawn interest amount from PPF will not be eligible for deduction under Sec. 80C.

If there is any impression otherwise, such impression will be incorrect.

S. RAJARATNAM

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