Friday, April 27, 2012

TAX TALK-30.04.2012-THE HITAVADA

TAX TALK-30.04.2012-THE HITAVADA
TAX TALK
BY CA. NARESH JAKHOTIA (Chartered Accountant)
“HOUSE RENT ALLOWANCE & INCOME TAX IMPLICATION”
Query 1]
My question is regarding HRA deduction from Salary. I am working in a private institution based in Nagpur. My consolidated salary is approx Rs. 25k per month. Is there any provision for HRA deduction from my consolidated salary while computing my income tax liability? If yes, what amount can be claimed as deduction for income tax purpose? [Shantukumar-shantukumarved@gmail.com]
Opinion:
1.      Assessee receiving HRA from Employer:
Salaried Assessees who are in receipt of House Rent Allowance (HRA) from an employer can claim an exemption u/s 10(13A) of the Income Tax Act-1961 read with Rule 2A of the Income Tax Rules, 1962.
The least of following can be claimed as deduction u/s 10(13A):-
a.       An amount equal to 50% of salary, where the residential house is situated at Bombay, Calcutta, Delhi or Madras and an amount equal to 40% of salary where residential house is situated at any other place;
b.      House rent allowance received by the employee in respect of the period during which the rental accommodation is occupied by the employee during the previous year; or
c.      The excess of rent paid over 10% of salary.
Following points need to be taken in to consideration while calculating the amount of HRA admissible as exemption u/s 10(13A):
a.       “Salary” for the purpose of computation of exemptions u/s 10(13A) means Basic Salary and includes Dearness Allowance if terms of employment so provide. It also includes commission based on a fixed percentage of turnover achieved by an employee as per the terms of contract of employment AND EXCLUDES ALL OTHER ALLOWANCE & PERQUISITE.
b.      Exemption is not available where an employee lives in his own house, or in a house for which he doesn’t pay any rent.

2.      Assessee not receiving HRA:
In case of other Individual assessees who are not in receipt of HRA from an employer but are living in a rented premises, option of claiming deduction u/s 80GG is available.

Query 2]
I am a senior citizen, 66 years of age, having no taxable income, as at present. I have now decided to sell out my plot, which is in Nagpur city limit, which was purchased in 1994.
My Queries are:
1.      Please let me know the Cost Inflation Index for the financial year 1994-95 & 2012-13?
2.      What is time limit within which the LTCG Tax saving bonds can be purchased?
3.      What is the tax rate under new DTC 2012 for Income under LTCG?
4.      In Nagpur city, where I can purchase the REC tax saving bonds, for claiming tax exemption under sec. 54 EC of I. Tax Act? [Chandrakant Badkas- ckvbadkas@gmail.com]
Opinion:
1.      Cost Inflation Index (CII) for the F.Y. 1994-95 is “259”. The CII for the FY 2012-13 has not yet been notified.
2.      For claiming an exemption u/s 54EC by investing the Long term Capital Gain amount in the specified bonds issued by NHAI/REC, the time limit is of 6 months.
  1.  In the original version of Direct Tax code released, the capital gain was proposed to be taxed at a regular rate as per applicable income slab & not at a special rate. However, dust on the DTC has not cleared completely & the final provisions will only be known after the same is replaced in the public domain.
  2. The application form for subscription can be accessed at www.recindia.nic.in or at www.nhai.org .

Query 3]
1.      One of our employees is having house property in joint name with his wife (50% Share) He has availed Loan from bank. Please clarify whether he can claim 100% accrued interest benefit while computing income from house property based on the declaration given by him stating that his wife is not claiming the accrued interest in his return as she is not an assessee & that her income is below taxable income?
2.      Here, I want to add that lease income which he is getting from that house property as on date is also Shared i.e., 50%income is accounted in his wife name.
3.      Suppose if he wants to avail HRA benefit from our company terminating lease, whether he is entitled to rebate allowable under Income tax act based on the receipt given/ obtained from his wife since she is holding only 50% share?
You are requested to send your clarification please at the earliest if possible so as to resolve the issues under reference. [Natarajan Subramanian - sans592000@yahoo.co.in]
Opinion:
1.      Ownership is a condition precedent for claiming an exemption u/s 24(b) or u/s 80C of the Income Tax Act-1961. Without ownership, benefit of deduction cannot be availed by the assessee. In the case elaborated by you, non availability of income in the hands of the wife or non availment of deduction by wife doesn’t entitle husband to claim the deduction.
2.      Two Separate treatments are not possible, one for recognizing the income & the other for claiming the deduction. On the one side, assessee (employee-husband) want to prove that he is the owner of the house property for claiming the deduction u/s 24(b) / 80C and on the other side, want to isolate himself while recognizing the income. It appears unacceptable & illegitimate.
3.      It appears that the employee has leased the jointly owned house property to the company and the company has allotted the same as rent free accommodation to the employee. There is no if bar in the Income tax in husband claiming deduction u/s 10(13A) on rent payment to wife.

Saturday, April 21, 2012

TAX TALK-23.04.2012-THE HITAVADA


TAX TALK-23.04.2012-THE HITAVADA
TAX TALK
BY CA. NARESH JAKHOTIA (Chartered Accountant)
“SECTION 80TTA TO GIVE DEDUCTION OF RS. 10,000/-TOWARDS INTEREST ON SAVING A/C”
Query 1]
My friend was admitted in the hospital and died almost after 19 days in the hospital, Our Company sanctioned medical reimbursement worth Rs 2.15 Lacs but the audit department deducted Income Tax of almost Rs. 65000/-. Is there any provision to get that back as death claim, his family already spend that money & they got back the amount as reimbursement only. The same is not an income for his family. Deduction of Income tax of Rs 65,000/- is a big amount for that family. Is there any provision to get that amount back from the Income tax department? If so, kindly advise.
 [yogesh_vitankar@yahoo.com]
Opinion:
1.      The legal provision for taxability of medical expenses reimbursement in respect of medical facilities in India in the hands of employee is as under:
- The fixed medical allowance given to an employee is taxable.
- Medical reimbursement done to an employee by an employer is not taxable in the hands of an employee, if treatment of the employee or his family member is done in any of the following hospitals:
a] Hospital maintained by an Employer
b] Hospital maintained by Central Government or State Government or Local Authorities
c] Hospital approved by Government for its employees
d] For certain prescribed diseases/ailment, hospital approved by the Chief Commissioner of Income Tax.
The reimbursement in (a) to (d) shall be tax free without any upper ceiling or cap.
2.      In respect of reimbursement of medical expenses reimbursement done to an employee for treatment in any hospital other than those covered in (a) to (d) above, there is a maximum cap of Rs. 15,000/-.
3.      In the case of your friend,
(i) if the treatment has been carried out in the hospital mentioned in 1 (a) to (c) or
(ii) if it is done in an approved hospital for certain prescribed diseases / ailment,
then, the amount will not be taxable in the hands of deceased employee.
The family can get back the refund from the income tax department after filing the income tax return of the deceased employee in a representative capacity.
4.      The diseases & ailments for the purpose of above exemption are prescribed under Rule 3A of the Income Tax Rule as under:
(a) cancer;
(b) tuberculosis;
(c) acquired immunity deficiency syndrome;
(d) disease or ailment of the heart, blood, lymph glands, bone marrow, respiratory system, central nervous system, urinary system, liver, gall bladder, digestive system, endocrine glands or the skin, requiring surgical operation;
(e) ailment or disease of the eye, ear, nose or throat, requiring surgical operation;
(f) fracture in any part of the skeletal system or dislocation of vertebrae requiring surgical operation or orthopaedic treatment;
(g) gynaecological or obstetric ailment or disease requiring surgical operation, caesarean operation or laperoscopic intervention;
(h) ailment or disease of the organs mentioned at (d), requiring medical treatment in a hospital for at least three continuous days;
(i) gynaecological or obstetric ailment or disease requiring medical treatment in a hospital for at least three continuous days;
(j) burn injuries requiring medical treatment in a hospital for at least three continuous days;
(k) mental disorder - neurotic or psychotic - requiring medical treatment in a hospital for at least three continuous days;
(l) drug addiction requiring medical treatment in a hospital for at least seven continuous days;
(m) anaphylectic shocks including insulin shocks, drug reactions and other allergic manifestations requiring medical treatment in a hospital for at least three continuous days;
Query 2]
Recent announcements indicate that interest on savings bank account up to INR 10,000/- is exempt from income tax. The following doubts arises for which I seek your clarification:
1.      Does this mean that if my income from interest on one savings bank account is INR 12,500/- only INR 2500 is to be added to determine my net taxable income?
2.      Is this exemption available in addition to INR 1,00,000/- under 80C?
3.      Is this exemption available for each savings account separately earning interest more than INR 10,000/- or Only on total combined interest on savings accounts held in my name? That is, if I have three savings accounts each earning INR 12,100/-, 3,800/- & 15,950/- (Total INR 31,850/-), then only INR 10,000/- would be exempt (over & above 80 C or within) while balance INR 21,850/- would be added to determine taxable income or 10,000/- + 3,800/- + 10,000/- = 23,800/- will be exempt for individual savings accounts & only 8,050/- would be included in taxable income?
4.      If my income from all sources - FDs, Savings Interest etc is less than INR 2,00,000/- but interest on savings account exceeds INR 10000 would I be required to file IT Return?
5.      If the FD’s are maturing only in FY 2013-14 & interest would be paid only on maturity then do I have to include interest due till 31st March 2013 in the income? Please advice. [J. R. Witthal - rv_jawalikar@yahoo.com]
Opinion:
The Finance Bill 2012 has proposed to insert a new section 80TTA in the Income Tax Act – 1961 which will provide deduction up to Rs. 10,000/- to an Individual/ HUF from Gross Total Income towards Interest on saving bank A/c maintained with a bank / society / post office. The deduction admissible shall be interest received or Rs. 10,000/- whichever is lower.
With above basic coverage on the provision proposed to be incorporated, the replies to your queries are as under:
1.      The deduction towards interest on all saving accounts taken together cannot exceed Rs. 10,000/-. If the interest on saving bank account received is Rs. 12,500/-, then effectively only Rs. 2,500/- will be taxable.
2.      The deduction is in addition to deduction of Rs. 1 Lacs admissible u/s 80C of the Income Tax Act-1961.
3.      As already mentioned, the maximum amount of deduction admissible u/s 80TTA can not exceed Rs. 10,000/-. If you will be receiving Rs. 31,850/- from three saving accounts, you will be entitled for Rs. 10,000/- only as deduction u/s 80TTA & the balance amount of Rs. 21,850/- will be taxable.
4.      The filing of income tax return would not be mandatory if your Gross Total Income is below the applicable basic exemption limit even though interest on saving accounts exceeds Rs. 10,000/-.
  1. The interest to be offered for taxation depends upon the method of accounting regularly followed by the assessee in recognizing the income.
    If Assessee is following cash (Receipt) system of accounting then the interest income has to be offered at the end of FD Tenure i.e., at the time of maturity of FD. If Assessee is following mercantile (Accrual) system of accounting then interest income is required to be offered for taxation every year on due basis as income of that year only.
    In view of the Circular No. 371 dated 21.11.1983 issued by the Central Board of Direct Taxes (CBDT), we advise the readers to offer the interest on Bank FDR on accrual (due) basis only.

Saturday, April 14, 2012

TAX TALK-16.04.2012-THE HITAVADA

TAX TALK-16.04.2012-THE HITAVADA

TAX TALK

BY CA. NARESH JAKHOTIA (Chartered Accountant)

“CLOSURE OF CAPITAL GAIN ACCOUNT SCHEME-1988”

Query 1]

I had opened capital gain account after the sale of my house and the amount deposited in the account has been used by me for the flat under construction. I have been told by bank to get the application of closing account signed by the IT department of concerned circle which for me is Bhandara but they failed to understand and directed me to get it done at Nagpur with a request application which I deposited there and I was told I shall get the document by post duly signed. For the last one month I did not get it and I have proof of deposition of application with me. How can I get my account closed now please advise. [cjddhar@sify.com]

Opinion:

CBDT Notification No. GSR 724(E) dated 22/06/1988 contains the salient features of Capital Gain Accounts Scheme-1988. Under Rule 13 of the said scheme, the account can be closed by submitting an application in Form G to the bank. The Form G needs to be approved by the concerned Assessing Officer of the Assessee. Without approval of the Assessing Officer, bank will not be able to close the account. For the general benefit, we have uploaded the Capital Gain Account Scheme-1988 at www.nareshjakhotia.blogspot.com. You may please further represent before your Assessing Officer with the copy of the Scheme as mentioned above.

Query 2]

Banks are accepting Fixed Deposits from the Customer and pay the same on its Maturity with Interest.

We are accepting FDR’s with Quarterly Compounding Interest and mentions Maturity Amount as per Quarterly Compounding [Subject to TDS]. As per Bank's Definition, Quarter means April to June, July to Sept, Oct. to Dec & Jan to Mar. But one of our Valued Customers is insisting Quarter means three months from the date of Initial Deposit according to TDS & requested to deduct tax at source on that basis only. If we do calculations by above two methods, there is some Difference in payment of Interest. FDR is for One Year [Quarterly Compounding, (Principal + Interest) to Paid on Maturity date].

As per as Bank's Calculation is concerned, Interest is being Credited, there is a Difference in First Quarter and Last Quarter as the same is bifurcated, Less amount [Interest - TDS] is Credited to FDR Account in First Quarter and accordingly the Difference is continued. My query is, is there any Provision as far as Income Tax Act is concern, regarding which Quarter is to be considered i.e. April - June, July to Sept, Oct. to Dec & Jan to Mar Or Three Months from Initial Deposit + 3 Months + 3 Months + 3 Months. Please guide me. [2milind.joshi@gmail.com]

Opinion:

1. TDS provisions are very simple & crystal clear as far as the timing of tax deduction at source is concerned. The tax at source is required to be deducted at source the time of
-Credit or
- Payment
whichever is earlier.

2. Depending upon the mode that is adopted by the payer, the TDS would be required to be done. The TDS mechanism totally relies on the method for interest payment/credit followed by the Deductor. In your case, the moment you account for the interest entries, the TDS provision would apply.

Query 3]

I am a salaried person & new at share trading. My income from salary is Rs. 2,35,036/-, Deduction permissible is Rs. 54,982/-, Net income after deduction is Rs. 1,80,054/- (2,35,036 – 549,82). I have bought and sold some share in financial year 2011-12 in which I earn a short term capital gain Rs. 1,100/- & a short term capital loss of Rs. 435/-. My queries are:

1. What will my capital gain?

2. Do I have to show it in form 16?

3. If yes, in which column and how to calculate tax? [pravin_chandankhede@yahoo.com]

Opinion:

1. Your net taxable short term capital gain in the FY 2011-12 is Rs. 665/-

2. You could have reported it to your employer to include it in Form No. 16. Even if it is not reported or included in Form No. 16, you can consider the same & pay the tax on it while filing your income tax return.

3. STCG is required to be shown in “Schedule-TI”, “Schedule-CG” in the ITR-2. It is taxable at a special rate of 15% u/s 111A of the Income Tax Act -1961 even though your other income remains in the tax slab of 10%.

Monday, April 9, 2012

CAPITAL GAINS ACCOUNTS SCHEME-1988, [GSR 724(E), DATED 22-6-1988]

CAPITAL GAINS

ACCOUNTS SCHEME, 1988

[GSR 724(E), DATED 22-6-1988]

In exercise of the powers conferred by sub-section (2) of section 54, sub-section (2) of section 54B, sub-section (2) of section 54D, sub-section (4) of section 54F and sub-section (2) of section 54G of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby frames the following Scheme, namely :—

Short title, commencement and application.

1. (1) This Scheme may be called the Capital Gains Accounts Scheme, 1988.

(2) It shall come into force on the date of its publication in the Official Gazette.

(3) It applies to all assessees who are eligible for exemption under section 54, 54B, 54D, 54F or 54G of the Income-tax Act, 1961 (43 of 1961).

Definitions.

2. In this Scheme, unless the context otherwise requires,—

(a) account” means a deposit account under this Scheme;

(b) “account-A” means deposit account-A mentioned in paragraph 4 of this Scheme;

(c) “account-B” means deposit account-B mentioned in paragraph 4 of this Scheme;

(d) “Act” means the Income-tax Act, 1961 (43 of 1961);

(e) “Deposit Office” means any branch or branch office of the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955) or of a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), or of a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970) or under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980), authorised by the Central Government, by notification in the Official Gazette, to receive deposit and maintain account of the depo-sitor, under this Scheme;

(f) “depositor” means an assessee who is eligible to make a deposit under section 54, 54B, 54D, 54F or 54G of this Act;

(g) all other words and expressions used herein but not defined and defined in the Act shall have the meanings respectively assigned to them in the Act;

(h) “Form” means a form appended to this Scheme.

Deposits how to be made.

3. A deposit or deposits may be made under the provisions of section 54 or section 54B or section 54D or section 54F or section 54G of the Act by any depositor intending to avail of the benefit under the said section or sections of the Act, as the case may be, in accordance with the provisions of this Scheme.

Types of deposits.

4. (1) There shall be two types of deposit accounts, namely :

(i) “Deposit account-A”; and

(ii) “Deposit account-B”.

(2) The deposit made under account-A shall be in the form of ‘savings deposit’ and subject to the other provisions of this Scheme, withdrawals under this account can be made from time to time by the depositor.

(3) The deposit made under account-B shall be in the form of ‘term deposit’ with an option to the depositor to keep the deposit as cumulative or non-cumulative deposit. Except as provided under paragraph 7 and paragraph 9, withdrawals under this account can be made only after the expiry of the period for which the deposit under this account has been made and accepted.

1(4) Such deposits may be made in one lump sum or in instalments at any time on or before the due date of furnishing the return of income under sub-section (1) of section 139 of the Act as is applicable in the case of the depositor.

Application for opening account.

5. (1) Every depositor who is desirous of opening an account or accounts, as the case may be, under this Scheme for the first time, shall apply to the deposit office in Form A or as near thereto as possible, in duplicate and tender the amount of deposit payable in the manner specified in sub-paragraph (4) and a depositor intending to avail of the benefit under more than one section of the Act, as referred to in paragraph 3, shall make separate applications in the same manner, for opening account or accounts under each of such sections.

(2) While applying under sub-paragraph (1) the depositor shall exercise his option as to whether the amount is to be deposited in account-A or in account-B or in both the accounts, and in case of the depositor exercising his option to open account-B, the depositor shall also exercise his option as to whether the deposit is to be made as cumulative or non-cumulative deposit as referred in sub-paragraph (3) of paragraph 4.

(3) On receipt of an application under sub-paragraph (1), the deposit office shall open an account or accounts in the name of the depositor as opted by him under sub-paragraph (2).

(4) The payment of amount of deposit shall be made by the depositor either in cash or by crossed cheque or by draft along with the application.

(5) Every subsequent deposit shall be made into the deposit office at which the account stands, in the same manner as stipulated in sub-paragraph (4).

(6) If the deposit is made by a cheque or a draft then, subject to such cheque or draft being realised, the effective date of deposit for the purpose of claiming exemption under the Act will be the date on which the cheque or draft is received by the deposit office along with the application under sub-paragraph (1) or sub-paragraph (5), as the case may be.

(7) The interest on the amount of deposit shall accrue and will be calculated subject to the provisions of paragraph 8, with effect from the date of deposit in cash or the date of realisation of the proceeds of the cheque or the draft tendered by the depositor.

(8) In the case of deposit under account-A, the deposit office shall issue a pass book to the depositor wherein all amounts of deposits, withdrawals, together with interest due, shall be entered over the signature of the authorised officer of the deposit office.

(9) In the case of deposit under account-B, deposit office shall issue a deposit receipt wherein the principal amount of deposit, date of deposit, date of maturity of deposit, shall be entered over the signature of the authorised officer of the deposit office.

Issue of duplicate pass book or receipt.

6. In the event of loss or destruction of the pass book receipt referred to in sub- paragraph (8) or sub-paragraph (9) of paragraph 5, the deposit office may, on an application made to it in this behalf, issue a duplicate thereof.

Transfer and conversion of the account.

7. (1) A depositor may, if he so desires, apply for transfer of his account or accounts, from one deposit office to another deposit office of the same bank.

(2) A depositor having a deposit in account-B may, at any time, if he so desires, apply in Form-B or as near thereto as possible, together with his deposit receipt, for transfer of the amount standing to his credit in account-B to his deposit in account-A opened under the same section of the Act under which the said account-B was opened and the request of the depositor may be accepted subject to the other provisions of this Scheme.

(3)(a) A depositor while applying under sub-paragraph (2) shall furnish in Form B the requisite particulars of his account-A to which the amount from account-B is required to be transferred;

(b) Where the depositor is not having a deposit in account-A, he shall state such fact and also make a request for opening an account-A in his name, as specified in Form B.

(4) If the request under sub-paragraph (2) has been made for transfer of amount standing to the credit in account-B, before the expiry of the specified period for which the deposit in account-B was made, such request shall be treated as premature withdrawal of amount from deposit in the said account-B and the amount of interest accrued, if any, in the said account-B shall be calculated by the deposit office in accordance with the provisions of sub-paragraph (4) of para- graph 8.

(5) If the request under sub-paragraph (2) has been made for transfer of amount standing to the credit in account-B on or after the expiry of the specified period for which the deposit in account-B was made, the amount of interest accrued in account-B shall be calculated at normal rate as specified by the Reserve Bank of India in pursuance of paragraph 8 in respect of a deposit in account-B.

(6) On receipt of an application under sub-paragraph (2), the deposit office shall calculate the amount of interest, if any, accrued in account-B till the date on which actual transfer of amount to account-A is made, subject to the provisions of paragraph 8 and close account-B after transferring the total amount standing to the credit in account-B to account-A:

Provided that where in such case of transfer the depositor does not have a deposit in account-A, an account-A shall be opened in the name of the depositor and the amount standing to his credit in account-B shall then be transferred to account-A as so opened.

(7) A depositor, if he so desires, may apply in Form B together with his pass book, for opening an account-B in his name, by way of transfer of the whole or any part of the amount standing to his credit in account-A, under the same section of the Act under which his account-A has been opened.

(8) After the conversion of account-B to account-A or vice versa in the manner specified above, the interest in newly opened account or accounts, as the case may be, shall accrue with effect from the date of opening of such account or accounts.

Interest.

8. (1) Interest at such rate as may be specified by the Reserve Bank of India, from time to time, shall be allowed for each calendar month on the lowest balance at the credit of a depositor under account-A, between the close of the 10th day and the end of the month and shall be credited to the account at the end of each half-year.

(2) Interest at such rate, as may be specified by the Reserve Bank of India, from time to time, shall be allowed in respect of deposit in account-B. In case of cumulative deposit in account-B, the amount of interest accrued will be deemed to have been reinvested and in case of non-cumulative deposit in account-B, the amount of interest will become due and payable at quarterly intervals.

(3) Interest due at the end of each half year in respect of account-A will be credited only when the amount is Re. 1 or more and the total amount of interest payable in respect of account-A or account-B will be rounded off to the nearest five paise.

(4) If a depositor applies under paragraph 7 or paragraph 9 or paragraph 13 for conversion of the account or withdrawal from the account or closure of the account, as the case may be, before completion of the period for which the deposit in account-B has been accepted by the deposit office, the rate of interest payable in respect of such deposit shall be the one applicable to the period for which the deposit remained with the deposit office less one per cent penalty for a premature withdrawal on account of such conversion or withdrawal or closure, as the case may be, and any adjustment required to be made on account of such premature conversion, withdrawal or closure with respect to amount of interest already credited to the account of the depositor, shall be made by the deposit office against the amount lying to the credit of the depositor in account-B.

Withdrawal from the account.

9. (1) A depositor having account-A may, at any time after making the initial subscription, if he so desires, apply in Form C or as near thereto as possible, together with the pass book to the deposit office for the withdrawal of amount from the balance to his credit in account-A, subject to the other provisions of this Scheme.

(2) On receipt of an application under sub-paragraph (1) the deposit office shall, subject to the provisions of sub-paragraph (3), permit the withdrawal and enter the amount withdrawn in the pass book.

(3) At the time of any withdrawal from account-A, other than the initial withdrawal, the depositor shall furnish in Form D in duplicate the details regarding the manner and extent of utilisation of the amount of immediately preceding withdrawal. The deposit office will retain one copy of Form D and return the other copy to the depositor after duly authenticating it.

(4) Where the amount of withdrawal referred to in sub-paragraph (2) exceeds rupees twenty-five thousand, the deposit office shall make payment to the depo-sitor, subject to the fulfilment of the conditions prescribed in sub-paragraph (3), by way of crossed demand draft drawn in favour of the person to whom the depositor intends to make the payment.

(5) A depositor intending to make withdrawal from his deposit in account-B, shall first apply in the manner prescribed in sub-paragraph (2) of paragraph 7 for transfer of the amount standing to his credit in account-B to account-A and may withdraw the requisite amount in the same manner and subject to the same conditions as stipulated in sub-paragraphs (1) and (3) after the amount standing to the credit in his account-B has been credited to his account-A by the deposit office.

(6) In case the application under sub-paragraph (5) is made before the expiry of the specific period for which the deposit in account-B was made, such withdrawal will be treated as premature withdrawal, and the amount of interest accrued, if any, shall be calculated subject to the provisions of sub-paragraph (4) of paragraph 8.

(7) On receipt of the application under sub-paragraph (5), the deposit office shall transfer the amount due and payable, together with the amount of interest accrued, in account-B, to account-A in the same manner and subject to the same conditions as stipulated in paragraph 7 and thereafter allow the request for withdrawal made by the depositor in the same manner and subject to the same conditions as stipulated in sub-paragraphs (1), (2), (3) and (4).

Explanation : For the removal of doubts, it is hereby clarified that the deposit office shall refuse the depositor to withdraw any amount lying in his account, in case of failure on his part to furnish all the details as required by sub-paragraph (3).

Utilisation of the amount of withdrawal.

10. (1) A depositor, withdrawing any amount out of the deposit made in pursuance of sub-section (2) of section 54 or sub-section (2) of section 54B or sub-section (2) of section 54D or sub-section (4) of section 54F or sub-section (2) of section 54G, shall utilise the whole or any part of the amount so withdrawn for the purposes specified in sub-section (1) of the section in relation to which the deposit has been made.

(2) The amount withdrawn shall be utilised by the depositor within sixty days from the date of such withdrawal for the purposes specified in sub-paragraph (1) and the amount or any part thereof which has not been so utilised shall be re-deposited in account-A immediately thereafter.

Nomination by the depositor.*

11. (1) A depositor may nominate in Form E or as near thereto as possible, one or more persons but not exceeding three to receive the amount standing to his credit in account-A or account-B, as the case may be, in the event of his death before the amount has become payable or having become payable, has not been paid.

(2) No nominations shall be made in respect of an account opened on behalf of a minor or a Hindu undivided family or a firm or a company or an association of persons or a body of individuals.

(3) A nomination made by a depositor may be varied by a fresh nomination in Form F or as near thereto as possible, by giving notice in writing to the deposit office in which the account stands.

(4) Every nomination and every cancellation or variation thereof shall be registered in the deposit office and shall be effective from the date of such registration, the particulars of which in the case of a deposit in account-A shall be entered in the pass book and in the case of a deposit in account-B shall be entered in the deposit receipt issued by the deposit office.

(5) If the nominee is a minor, the depositor may appoint any person to receive the amount due under the account in the event of the death of the depositor during the minority of the nominee.

(6) Where the nomination is in favour of more than one person, the nominee first named shall alone have the right to receive the amount standing to the credit in the account of the deceased depositor.

(7) Where the nominee first named has pre-deceased the depositor and the depositor has not cancelled the nomination or substituted the nomination, the nominee second named shall be entitled to receive the amount standing to the credit in the account of the deceased depositor and so on in respect of other successive nominees :

Provided that if any nominee is dead, the surviving nominee or nominees shall, in addition to the proof of death of the depositor, also furnish proof of death of the deceased nominee or nominees, as the case may be.

Charge or alienation.

12. The amount standing to the credit of any depositor in any account shall not be placed or offered by him as security for any loan or guarantee and shall not be charged or alienated in any manner whatsoever.

Closure of the account.

13. (1) If a depositor desires to close his account, an application shall be made with the approval of the Assessing Officer who has jurisdiction over the depositor to the deposit office in Form G or as near thereto as possible, and the deposit office shall pay the amount of balance including interest accrued, to the credit in the account of the depositor by means of crediting such amount to any bank account of the depositor.

(2) If a depositor in respect of whose deposit account a nomination is in force, dies, the nominee, if he desires to close the account or accounts and obtain the payment of the balance standing to the credit in the account of the deceased depositor, shall make an application to the deposit office in Form H or as near thereto as possible with the approval of the Assessing Officer who has jurisdiction over the deceased depositor, and the deposit office shall pay the amount of balance standing to the credit in the account of the deceased depositor including amount of interest accrued, by means of crediting such amount to any bank account of the nominee.

(3) If a depositor, in respect of whose deposit no nomination is in force, the legal heir of the deceased depositor shall make an application to the deposit office in Form H or as near thereto as possible, with the approval of the Assessing Officer who has jurisdiction over the deceased depositor, and the deposit office shall pay the balance standing to the credit in the account of the deceased depositor including the amount of interest accrued, by means of crediting such amount to any bank account of the legal heir :

Provided that where there are more than one legal heir of the deceased depositor, the legal heir making the claim individually may do so by producing the letter of disclaimer or letter of authorisation from other legal heirs in his favour :

Provided further that before granting the approval for closure of the account under this sub-paragraph, the Assessing Officer shall obtain from the legal heir a succession certificate issued under Part V of the Indian Succession Act, 1925, or a probate of the will of the deceased depositor, if any, or letter of administration to the estate of the deceased in case there is no will in order to verify the claim of such legal heir to the account of the deceased depositor.

(4) The depositor or the nominee or the legal heir, in order to obtain payment of the amount standing to the credit in the account shall while applying in Form G or Form H, also submit the pass book of account-A or deposit receipt of account-B, as the case may be, to the deposit office.

(5) The payment made by the deposit office to the depositor or the nominee or the legal heir in accordance with the provisions of this paragraph shall constitute a full discharge to the deposit office of its liability in respect of the deposit.

(6) Nothing contained in this paragraph or in paragraph 11 shall affect the right or claim which any person may have against the person to whom any payment is made under this paragraph.