If you also want to transfer your PPF maturity fund, then understand its tax calculation before doing so. If you do not understand the tax calculation, you may have to bear a huge loss. To understand this, let us take the help of an example.
Suppose your wife’s PPF is maturing in April. She wants to transfer Rs 23 lakh to your senior citizen savings account. Apart from this, she wants to give Rs 7 lakh to your daughter. What will be the impact on your tax in this case?
Tax arithmetic of PPF maturity
If you, your wife and your daughter are eligible for tax as residents in India. Your daughter is 18 years or older, then these tax implications will apply on receipt and transfer of PPF maturity amount. The PPF maturity amount that was deposited only by your wife will be completely tax-free in her income.
Transfer as a gift
If your wife transfers the PPF maturity amount to you and your daughter as a gift, then there will be no tax on it. Since gifts received from spouse and parents are not taxable, the amount that you and your daughter will receive will be tax-free in the hands of both. The interest that will be received from the gifted funds will come under the “clubbing provision” under the Income Tax Act.
Will be added to this income
This means that the interest will be added to your wife’s income and will be taxed as per her tax rate. However, if you reinvest the interest, the other income generated from it will be taxable in your hands. There is no special exemption or deduction for payments made under indemnity bonds under the Income Tax Act.
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