sec 80C PPF

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This query is : Resolved

CA.Ritu Agarwal (Querist)

07 August 2009 Hi.
An assessee has deposited some amount in Public Provident Fund. Now every year some iNTEREST IS ACCRUED IN HIS ACCOUNT. hOW WILL THE TREATMENT FOR ACCRUED INTEREST WILL BE DONE. WILL THE INTEREST AMOUNT WILL BE ELIGIBLE FOR 80C DEDUCTION.

chetan soni

chetan soni (Expert)

07 August 2009 No accrued interest on PPF is not deductible under sec 80C. Also note this will be exempt income in the hands of receiver.

Accured Interest on NSC is allowed as deduction u/s 80C for first 5 years. The reason behind that is interest on NSC is table in the hands of receiver whereas interest on PPF is fully exempt.

So giving the deduction on PPF interest will amount to loss of revenue.

CA.Ritu Agarwal

CA.Ritu Agarwal (Querist)

07 August 2009 I m asking only about PPF and not on NSC. So plz be specific.

but still I did not get u what u mean to say.

should we transfer Accrued Interest on PPF directly to capital account. or First we need to shown in computation and then it is exempt. please explain.

Moreover, the assessee I m dealing has made investment in 2000. say Rs. 90000. now his balance stands to 210000. but he did not record any transaction in previous years. PPF is for 20 years duration. plz tell me how to deal with this matter.

Thanks

chetan soni

chetan soni (Expert)

07 August 2009 Ritu,

I have already mentioned the PPF interest is not deductible under sec 80C.

Mentioning about NSC interest was for your information (as you might be confused abt applicability of sec 80C). Its ok if you don't need any other information on NSC.

Now show the interest on PPF in the computation & exempt the same. Now if need accounting treatment then there are two to show the same 1) show this income 2) directly mention this as addition to capital account. But in both the treatment you need to show this as income & then exempt it.

Take all years interest in computation (if the same was not mentioned in any year) & exempt the same.

CA.Ritu Agarwal

CA.Ritu Agarwal (Querist)

07 August 2009 ok. Thanks. but under which section Interest is exempt.

chetan soni

chetan soni (Expert)

08 August 2009 it is 10(11).

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