PPF, 
NSC, 
Mutual Fund, 
Tax
PPF, NSC, Mutual Fund, Tax

Taxability Of PPF, NSC, And Mutual Funds Are Same For Resident, Non-Resident Indian

An NRI can continue to maintain a PPF account for the existing term, but cannot extend it further. Salaried individuals can take benefit of interest payment on personal loan only for matters related to house purchase, construction, or repairs. Gifts received from parents and uncles are not taxable
Q

I had made investments in National Savings Certificate (NSC), Public Provident Fund (PPF) and equity mutual funds when I was in India. Are the maturity proceeds of these investments taxable? My friend in India tells me that only the returns from life insurance policy are tax-free. What about the maturity proceeds of NSC, PPF, and mutual fund investments?

A

There is no difference in taxability of these instruments in the hands of non-resident Indians (NRIs) viz-a-viz resident Indians. The maturity proceeds of life insurance policies are fully exempt to the extent provided under Section 10(10d) of the Income-tax Act, 1961, which provides so if the annual premium paid during the premium paying term did not exceed 10 per cent of the sum assured during any year of the premium paying term.

For policies issued after April 1, 2023, the maturity proceeds will be tax-free only for those policies where the aggregate premium did not exceed Rs. 5 lakh in a year. The maturity proceeds from PPF are fully tax-free, while the interest on NSC is taxable on either accrual or receipt basis as opted by the taxpayer. The profits on equity mutual funds are taxed at a flat rate of 10 per cent without indexation, beyond the initial exemption of Rs. 1 lakh, if held for more than 12 months.

Where mutual funds are held for less than 12 months, the profits on capital gains from such investments are taxed at a flat rate of 15 per cent. As a non-resident Indian under the tax laws, you are not allowed to set off shortfall in the basic exemption limit against capital gains on listed shares and equity-oriented mutual fund schemes and other long-term capital gains.

Also note that as an NRI, you can continue your PPF account for the running term, but cannot extend it beyond its term.

Q

I am a salaried person and I have taken a personal loan. Can I claim tax benefits for my personal loan?

A

For a salaried person, there is no tax benefit available on the interest paid on personal loan taken for personal use. However, if the loan is taken for the purpose of purchase, construction or repairs etc. of your house and you can establish the same, you can claim the interest paid in respect of such loan under Section 24(b) of the Income-tax Act, 1961. Please note that no tax benefit is available for repayment of personal loan even if the same has been used for the above stated purposes.

Q

I have received gifts of Rs 75,000 each in cash from my father, mother and my father’s brother. Who is liable to pay tax on this transaction?

A

Since Gift Tax has been repealed long ago, the donor is not subject to any gift tax. So, your parents and uncle are not liable to pay any tax on gifts made by them.

However, with the introduction of the recipient-based tax on gifts under Section 56(2), the recipient of a gift is liable to pay tax on such receipt, as these are treated as income if the aggregate sum of all the gifts received exceeds Rs. 50,000 in a financial year.

However, gifts received from certain specified relatives are exempt without any limit. Parents and uncle are included in the definition of such specified relatives. Thus, these gifts are not taxable in your hands either, and you are also not liable to pay any tax on such gifts.

The author is a tax and investment expert

(Disclaimer: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.)

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