511. Taxability of repayment of amount from the account under National Savings Scheme to the legal heirs of assessee
1. Sub-section (2) of section 80CCA of the Income-tax Act, 1961, provides that where any amount standing to the credit of an assessee under the National Savings Scheme, in respect of which a deduction had been allowed under sub-section (1) of the said section, is withdrawn in whole or in part in any previous year, the amount withdrawn shall be deemed to be the income of the assessee of that previous year.
2. A question has been raised whether the amount received under the National Savings Scheme by the legal heirs of an assessee after his death can be deemed to be the income of the legal heirs under section 80CCA(2).
3. The Board is of the view that where the amount credited to the account of an assessee under the National Savings Scheme is paid on the death of the assessee to his legal heirs, the amount so paid will not fall within the ambit of section 8OCCA(2) and, accordingly, the amount of such repayment will not be chargeable to tax in the hands of the legal heirs.
4. Similarly, the amount paid by way of Gross Insurance Value Element under the annuity plans of Life Insurance Corporation as referred to in clause (ii) of sub-section (1) of section 80CCA to the nominee or legal heirs of the assessee after his death will also not be covered by the provisions of section 80CCA(2) and will, accordingly, not be chargeable to income-tax in their hands.
Circular : No. 532, dated 17-3-1989
JUDICIAL ANALYSIS
EXPLAINED IN – In CIT v. Dr. Rodhan H. Shroff [1994] 207 ITR 957 (Bom.), the above circular was referred to in the context of repayment of annuity deposit to legal heirs under section 280D. The High Court accepted the submission of the assessee that “a deemed provision which is made in respect of an assessee, therefore, does not ipso facto extend to the legal heirs or nominee of the assessee.” (p. 962)
