Interest sop for PF money

QI am given to understand that as per clause (iii) of sub-section 5, Section 80C of the Income-Tax Act, if the house was purchased by taking a loan, then it has to be held for five years and not three years. Otherwise, tax deductions that I claimed for the repayment of principal would be added to my previous year’s income. Is it correct?

A) According to Section 80C (5) (iii), if the assessee transfers the house property, in respect of which deduction has been claimed, before the expiry of five years from the end of the financial year in which possession of such property has been obtained by him, no deduction will be allowed in the previous year in which the house is transferred. The aggregate of the deductions allowed in the preceding years will be deemed to be the income of the assessee for the previous year in which the house property is transferred.

QI am an employee in a public-sector undertaking. If I don’t withdraw my accumulated EPF amount immediately after retirement, will the interest earned after the retirement date be taxable? GAUTAM TIWARI Via mail

A) The provisions of section 10 (11) of the Income-Tax Act envisages exemption to any payment from a Provident Fund, to which provisions of the Provident Fund Act, 1925 apply or from any other Provident Fund set up by the Central government and notified by it in this behalf in the official gazette. Hence, if the Provident Fund to which you have subscribed is covered under the PF Act, the interest accumulated on EPF account which is not withdrawn at the time of retirement would continue to enjoy the benefit of exemption and the entire amount received from the fund would be exempt.

QRAMADEVI Via mail

If the Provident Fund to which you have subscribed is covered under the PF Act, the interest accumulated on EPF account which is not withdrawn at the time of retirement would continue to enjoy the benefit of exemption

I have resigned from a private company. The company has contributed in my name to a superannuation fund. I have received 30 per cent of the commuted value amounting to `45,000 on my resignation out of the said fund. I also receive a quarterly annuity of `2,500 from the fund. Kindly let me know the taxability of these sums received from the fund. SHASHANK Via mail

A) The sums received from the superannuation fund — both by way of commutation and by way of quarterly payments will be taxable. An exemption is available under section 10 (13) of the Income-Tax Act, only in respect of any payment from an approved superannuation fund made on the death of a beneficiary or retirement at, or after, attaining a specified age, or on becoming incapacitated prior to such retirement.

In the instant case, since there is only resignation and no retirement on attaining the specified age, the commuted pension cannot be exempt. Also, pension received on a quarterly basis is not entitled to exemption.

(The writer is a chartered accountant. He can be reached at info@rathiandmalanis.com)