In 2021, I bought for Kisan Vikas Patra (KVP) 2 million. I have been paying income tax every year on the interest earned on it and also include it in my Income Tax Return (ITR). Since there is no provision for Tax Deduction at Source (TDS) on interest earned by KVP, its consolidated interest will appear in my 26AS and Annual Information Statement. What should I do to avoid double taxation while encashing KVP?
Name withheld on request
It is assumed that you are not required to maintain books of accounts and get audited under the provisions of the Income Tax Act, 1961.
Section 145 of the Act provides for taxation of income from other sources (such as interest) in accordance with the cash or mercantile system of accounting regularly employed by the assessee. Therefore, if the cash basis is regularly adopted, the interest earned on Kisan Vikas Patra (KVP) may be offered to tax in the year of its maturity. If the business basis is adopted on a regular basis, the interest should be offered to tax on accrual basis every year.
In the present case, you have opted to offer to tax the interest income earned from KVP on trading basis, assuming the regular system of accounting followed by you as per the above provisions.
In case of any query regarding mismatch of interest income appearing in AIS in the year of maturity as compared to interest income chargeable to tax in that year, the same can be explained on the basis of reconciliation of accrued amount. Amount declared to be taxed in previous years’ tax returns and necessary documentary evidence.
It may be separately noted that as per the present provisions of section 194A of the Act, on maturity of KVP, no tax is required to be deducted on the interest income. Hence, the tax payable (if any) by way of self-assessment tax/advance tax (as applicable) is fully payable.
Can a person who is a minor open a Public Provident Fund (PPF) account?
Name withheld on request
As per the provisions of the PPF scheme, any person can subscribe to PPF either on his own behalf or on behalf of a minor of whom he is the guardian. Hence, only a guardian is eligible to open a PPF account on behalf of a minor.
Note that only one account can be opened by any guardian in the name of a minor. All other conditions/limits applicable in case of PPF account are applicable for such account also.
Parijad Sirwala is Partner and Head, Global Mobility Services, Tax, KPMG in India.
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