Do I have to declare the profits as capital gains?


What happens to interest on PPF accounts for children after they turn 18? Does the PPF account continue to earn interest if there is no contribution, especially if the child is pursuing higher education? Assuming my son takes four years for graduation and two years for masters, it will take about 24 years for him to start a job and earn a salary. In this case, does his PPF account continue to earn interest?

After I turn 18, if I contribute to my son’s PPF account, do I still have to share it between his account and my account or can I contribute? ??1.5 lakh on my PPF account and ??1.5 lakh on his PPF account as well?

—Name hidden on request

In accordance with the current provisions of the Public Provident Fund Scheme, 2019 (PPF Scheme), the minimum annual contribution to a PPF account is ??500. If an account holder does not deposit the minimum amount, the account will be considered closed. However, even in such a case, the Account Holder will continue to charge interest on the closed account balance at the rate applicable to the Plan from time to time. The PPF account will also continue to earn interest even after a minor turns 18. In addition, in accordance with the PPF regime, a maximum of ??1.5 lakh per year can be deposited by PPF account. So, once your son has reached the age of majority, you can contribute ??1.5 lakh, respectively, on your PPF accounts and those of your son. However, please note that from a tax deduction perspective, the deduction in your hands would be limited to the maximum limit of ??1.5 lakh as prescribed under section 80C of the Income Tax Act, 1961.

I am a 36-year-old central government employee. I had invested in the stock market and requested IPOs. I’ve had ??12,300 profits made and ??71,800 unrealized profits for fiscal year 21. Do I have to declare this profit in the income tax return as capital gains? If it is mandatory, which tax return form should I submit?

-K. Jaya krishna

We have assumed that you have no business income. Any profit made on the sale of shares listed on the stock exchange is taxable as capital gains for the year of sale. When listed shares are held for more than 12 months, they will be considered long-term fixed assets and the resulting gains will be taxable as LTCG. If listed shares are held for 12 months or less, they will be considered short-term fixed assets and the resulting gains will be taxable as STCG.

Any unrealized profit would not be taxable and is not to be declared on your income tax return. Additionally, you will need to file your India income tax return using the ITR-2 form. Details of the sale and purchase should be reported in Annex CG of Form ITR-2 and Annex 112A.

Parizad Sirwalla is Partner and Head, Global Mobility Services, Tax, KPMG India.

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