Interest earned on ppf contribution given by me

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

09 December 2015 I want to contribute of Rs. 150000/- to PPF a/c of myself and same amount to my wife's PPF a/c. My wife is a house wife. The interest earned on PPF a/c of my wife shall be clubbed in my income. Whether this interest will be taxable in my hand? because as per Income Tax law and PPF Act, an assessee can contribute maximum of Rs. 1.50-Lakh and interest earned thereon shall be exempt from tax. In my case I am contributing Rs. 3-Lakh to PPF a/c (Rs. 1.50-Lakh for my PPF a/c and Rs. 1.50-Lakh to my wife's PPF a/c).

Please advice whether interest earned by my wife on his PPF a/c which was contributed by me will be taxable in my hand.

Amol S Joglekar

Amol S Joglekar (Expert)
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09 December 2015 No.
The interest is earned by your wife. Under the clubbing provisions, the same is clubbed in your income. Merely on account of clubbing provisions, the character of income does NOT change.

Querist : Anonymous

Querist : Anonymous (Querist)

10 December 2015 This means if I contribute Rs. 1.50-Lakh to PPF a/c of each adult member of my own family as per PPF Act, the interest earned by them on their PPF a/c shall be first seen as the income taxable in their own hand and as the same are exempt in their own hand then the same shall also be exempt in my own hand after clubbing of such interest in my own income. Finally, I want to say that I can create huge amount of tax free interest in such way. This is a very good measure of tax planning.

Amol S Joglekar

Amol S Joglekar (Expert)
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10 December 2015 Yes. It is. And many have been using it for years together.

See try to take another example on similar lines. Husband gifts to wife. Wife invests in agricultural farm. The agricultural income earned by wife is clubbed in the hands of husband.

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