My daughter has received a scholarship of Rs 5 lakh. Will she be taxed for this amount? Since she has never filed taxes, she does not have a PAN card. Should I make a PAN card for her?'
As per section 10(16) of the Income Tax Act, 1961, scholarships granted to meet the cost of education are exempt from income tax. The term scholarship is not defined under the Act. However, the dictionary meaning of scholarship is anything which makes education free of charge at a concessional rate of fees. Also, in general parlance, the cost of education may include not only the tuition fees but all expenses incidental to obtaining education. Considering this, scholarship received by your daughter to meet the cost of education may be claimed as exempt u/s 10(16) of the Act.
In case you are claiming an exemption of the scholarship received by your daughter u/s 10(16) and she does not have any other income for which a return is required to be filed in India, she is not mandatorily required to obtain a PAN card.
'I have been working in my company for seven years now. I want to withdraw some money from my Employees' Provident Fund (EPF) amount to make a downpayment for my house. Will I have to pay tax on this money? '
EPF does not allow withdrawal during service period for buying/construction of a house but grants a non-refundable advance for such purposes, which are not taxable in the hands of employees. But, you will need to check whether you are eligible to take such advance, as this is dependent on several factors such as the EPF rules in relation to such advances, the duration of your EPF membership, the amount of accumulated contribution in your account, etc.
'I am an NRI (non-resident Indian). I had opened a Public Provident Fund (PPF) account while I was in India. I am earning from my rented house in India. If I invest the rent in my PPF account, can I claim tax deduction?'
NRIs are not allowed to subscribe to PPF account. However, if an individual opened a PPF account while he was a resident of India and subsequently, he became an NRI, he is allowed to invest in the account. Since you opened the account when you were in India, you can continue to invest in the account. The amount invested can be claimed as a tax deduction under section 80C of the Income Tax Act, 1961, up to a maximum of Rs 1.5 lakh per financial year.
'I got a notice from the Income-Tax department for a tax return filed seven to eight years ago, which was when I had purchased my house. The notice has shown a certain amount as my annual income, which is too high. I am being asked to pay tax on that. Is this because the home loan has been included as my income? How should I reply to the notice? How should I prove that the income shown is wrong?'
You have not mentioned the section under which the notice has been issued. To understand the reason for issuance of the notice and the requirement from the tax authorities, you may meet the tax officer and find out more details and respond accordingly. Home loan cannot be added to your income. You will need to collate all documents based on which you filed the return and/or claimed any exemption or deduction so that wherever needed the same can be produced before the tax authorities for them to verify the accuracy of the return filed.
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Kuldip Kumar, partner and leader, Personal Tax, PwC India, answers your questions