Tax benefits under section 80C for the girl child under the Sukanya Samriddhi Account Scheme

Pursuant to the Budget announcement in July 2014, a special small savings instrument for the welfare of the girl child has been introduced under the Sukanya Samriddhi Account Rules, 2014. The following tax benefits have been envisaged in the Sukanya Samriddhi Account scheme:-

(i) The investments made in the Scheme will be eligible for deduction under section 80C of the Act.

(ii) The interest accruing on deposits in such account will be exempt from income tax.

(iii) The withdrawal from the said scheme in accordance with the rules of the said scheme will be exempt from tax.

Accordingly, a new clause (11A) is proposed to be inserted in section 10 of the Act so as to provide that any payment from an account opened in accordance with the Sukanya Samriddhi Account Rules, 2014 shall not be included in the total income of the assessee. As a result, the interest accruing on deposits in, and withdrawals from any account under the scheme would be exempt.

The Scheme has been notified under clause (viii) of sub-section (2) of section 80C vide Notification number 9/2015 S.O.210 (E),F.No. 178/3/2015-ITA-I dated 21.01.2015.

With a view to allow the deduction under section 80C to the parent or legal guardian of the girl child, amendment of section 80C of the Act is proposed to be made so as to provide that a sum paid or deposited during the year in the Scheme in the name of any girl child of the individual or in the name of any girl child for whom such individual is the legal guardian, would be eligible for deduction under section 80C of the Act.

These amendments will take effect retrospectively from 1st April, 2015 and will, accordingly, apply in relation to assessment year 2015-16 and subsequent assessment years.

NOTE ON RELEVANT CLAUSES  OF FINANCE BILL 2015

Clause 7 of the Bill seeks to amend section 10 of the Incometax Act relating to incomes not included in total income.

It is proposed to amend the aforesaid section by inserting a new clause (11A) so as to provide that any payment from an account opened in accordance with the Sukanya Samriddhi Account Rules, 2014 made under the Government Savings Bank Act, 1873, shall not be included in the total income of the assessee.

These amendments will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016- 17 and subsequent assessment years.

Clause 15 of the Bill seeks to amend section 80C of the Income-tax Act relating to deduction in respect of life insurance premia, deferred annuity, contributions to provident fund, etc.

It is proposed to amend sub-section (2) and sub-section (4) of the aforesaid section so as to provide that a sum paid or deposited during the year as a subscription in the name of any girl child of the individual or in the name of any girl child for whom such individual is the legal guardian, would be eligible for deduction, if the scheme so specifies.

This amendment will take effect retrospectively from 1st April, 2015 and will, accordingly, apply in relation to assessment year 2015-16 and subsequent years.

EXTRACT OF RELEVANT CLAUSES FROM FINANCE BILL 2015

7. Amendment of section 10.

In section 10 of the Income-tax Act,—

(I) after clause (11), the following clause shall be inserted, namely:—

“(11A) any payment from an account, opened in accordance with the Sukanya Samriddhi 5 of 1873. Account Rules, 2014 made under the Government Savings Bank Act, 1873;”;

(II)      in clause (23C), after sub-clause (iiia), the following sub-clauses shall be inserted, namely:— “(iiiaa) the Swachh Bharat Kosh, set up by the Central Government; or

 (iiiaaa) the Clean Ganga Fund, set up by the Central Government; or”;

(III)     with effect from the 1st day of April, 2016—

(a) after clause (23ED), the following clause shall be inserted, namely:—

‘(23EE) any specified income of such Core Settlement Guarantee Fund, set up by a recognised clearing corporation in accordance with the regulations, as the Central Government may, by notification in the Official Gazette, specify in this behalf:

Provided that where any amount standing to the credit of the Fund and not charged to income-tax during any previous year is shared, either wholly or in part with the specified person, the whole of the amount so shared shall be deemed to be the income of the previous year in which such amount is so shared and shall, accordingly, be chargeable to income-tax.

Explanation.—For the purposes of this clause,—

(i) “recognised clearing corporation” shall have the same meaning as assigned to it in clause (o) of sub-regulation (1) of regulation 2 of the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012 made under the Securities and Exchange Board of India Act, 15 of 1992.;

(ii) “regulations” means the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012 made under the Securities and Exchange Board of India Act, 15 of 1992.;

(iii)     “specified income” shall mean,— (a) the income by way of contribution received from specified persons;

(b) the income by way of penalties imposed by the recognised clearing corporation and credited to the Core Settlement Guarantee Fund; or

(c) the income from investment made by the Fund;

(iv)     “specified person” shall mean,—

(a) any recognised clearing corporation which establishes and maintains the Core 50          Settlement Guarantee Fund; and

(b) any recognised stock exchange being shareholder in such recognised clearing corporation;’;

(b)      in clause (23FB), before the Explanation, the following proviso shall be inserted, namely:—

“Provided that nothing contained in this clause shall apply in respect of any income of a venture capital company or venture capital fund, being an investment fund specified in clause

(a) of the Explanation 1 to section 11 5UB, of the previous year relevant to the assessment year beginning on or after the 1st day of April, 2016;”;

(c)      after clause (23FB), the following clauses shall be inserted, namely:—

‘(23FBA) any income of an investment fund other than the income chargeable under the head “Profits and gains of business or profession”;

(23FBB) any income referred to in section 1 15UB, accruing or arising to, or received by, a unit holder of an investment fund, being that proportion of income which is of the same nature as income chargeable under the head “Profits and gains of business or profession”.

Explanation.—For the purposes of clauses (23FBA) and (23FBB), the expression “investment fund” shall have the meaning assigned to it in clause (a) of the Explanation 1 to section 115UB;’;

(d)      after clause (23FC), the following clause shall be inserted, namely:—

‘(23FCA) any income of a business trust, being a real estate investment trust, by way of renting or leasing or letting out any real estate asset owned directly by such business trust.

Explanation.—For the purposes of this clause, the expression “real estate asset” shall have the same meaning as assigned to it in clause (zj) of sub-regulation (1) of regulation 2 of the   Securities and Exchange Board of India (Real Estate Investment Trusts) Regulations, 2014 made under the Securities and Exchange Board of India Act, 1992;’;    15 of 1992.

(e)      in clause (23FD), after the word, brackets, figures and letters “clause (23FC)”, the words, brackets, figures and letters “or clause (23FCA)” shall be inserted;

(f) in clause (38), the second proviso shall be omitted.

15. Amendment of section 80C.In section 80C of the Income-tax Act,—

(I)       in sub-section (2), in clause (viii), for the words “as subscription to”, the words, brackets and figure “as subscription, in the name of any person specified in sub-section (4), to” shall be substituted;

(II)      in sub-section (4), after clause (b), the following clause shall be inserted, namely:—

20 “(ba) for the purposes of clause (viii) of that sub-section, in the case of an individual, the individual or any girl child of that individual, or any girl child for whom such person is the legal guardian, if the scheme so specifies;”.

( Compiled by Taxguru Team)

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0 responses to “Interest on & withdrawal from Sukanya Samriddhi Account exempt from Tax”

  1. Sumit says:

    Yes, the investment in Sukanya Samriddhi Account Scheme is totally tax free. The interest earned in such account as well as maturity proceeds both will also be tax free based on the current tax laws. In short it falls under E.E.E. category wherein Investment+Interest+Maturity is TAX EXEMPTED (E.E.E.)

  2. Agath Maher says:

    Its really Bouncer !!!!! Just got out of the boundry. Please mention cleary for common people in common language. we dont understand laws and clauses of rules mentioned above as we are not CA. Any thanks for giving the details.

  3. kanika says:

    whatever written in the article above goes above the head….

    just say clearly…whether it is the final amount after maturity will be taxable or not…

    please do not complicate things by using such copy paste type language…

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