Amount received by son from PPF closure proceeds of Father after father death. HOw to show in ITR 2

The ₹4.5 lakh received from the father's PPF account closure is fully tax-exempt under Sections 10(11) and 56(2)(x). However, it is necessary to report this amount in ITR-2 under Schedule EI (Exempt Income) to justify the source of funds for the subsequent mutual fund investment, which will be tracked in the taxpayer's AIS. While the mutual fund purchase itself isn't taxable, future gains or dividends from it will be subject to tax.

PPF proceeds received by a nominee after the account holder's death are completely tax-free.

Under Section 10(11) of the Income Tax Act, both the principal and the accumulated interest in a PPF account are exempt from income tax. This exemption carries over to the nominee or legal heir who receives the closure proceeds ,  the amount does not become their income and does not need to be reported as taxable income in ITR-2.

You do not need to show the Rs 4.5 lakh under:
- Income from Other Sources
- Capital Gains
- Any other taxable head

If you want to document the receipt, you can disclose it under Schedule EI (Exempt Income) in ITR-2, selecting "Any other" and noting "PPF closure proceeds received as nominee after father's death." This is optional but recommended for transparency.

Once the money is invested in mutual funds, any future gains or dividends from those mutual funds will be taxable in the year you receive or realize them ,  that is a separate matter from the PPF proceeds themselves.

For a complete guide on how inherited assets and legal heir taxation works for AY 2026-27, this [ITR filing guide for legal heirs](https://taxgarden.in/blog/itr-filing-deceased-person-legal-heir-india-ay-2026-27) covers the full picture.

Thanks all from bottom of my Heart