AMIT BAJAJ ADVOCATE

I. Introduction

In exercise of powers available under Section 80C(2)(viii) of the Income-tax Act, 1961 ("the Act"), the Central Government had notified a scheme known as "SukanyaSamridhi Account Scheme" videNotification No. G.S.R. 863(E) dated 02-12-2014.

Under the scheme, an amount deposited as per the provisions of the scheme was eligible for deduction under section 80C and the interest earned on the scheme was taxable.

II. Existing Provision

Under the existing provisions of section 80C(1)of the Act, in computing the total income of an assessee being an individual or a HUF, a deduction is allowed for certain sumsspecified in sub-section (2) thereof, paid or deposited in the previous year as does not exceed one lakh fifty thousand rupees in aggregate, subject to prescribed conditions. Moreover, in respect of the various sums specified in sub-section (2), the deductions are available to such persons as are specified in sub-section (4) thereof.

III. The Proposed amendment

The Finance Bill, 2015 proposes to amend Section 80C(2)(viii) so as to provide that subscription to any such security of the Central Government or any such deposit scheme as that Government may, by notification in the Official Gazette, specify in this behalf may be made in the name of any person specified in sub-section (4) thereof.

The Finance Bill, 2015 also proposes to insert clause (ba) in sub-section (4) of the above section which specifies the following persons for the purposes of Section 80C(2)(viii):

IV. Effective date

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

V. Other related amendments

The Finance Bill 2015 also proposes to amend section 10 by inserting a new clause (11A) so as to provide that any payment from an account opened in accordance with the SukanyaSamriddhi Account Rules, 2014 made under the Government Savings Bank Act, 1873, shall not be included in the total income of the assessee.

VI. Conclusion

It is a good scheme with good purpose. But its benefits are limited as the deposits under the scheme are within the overall limit of one lakh rupees under section 80C of the Act. However, by exempting interest earned thereon, the scheme is at par with deposits in Public Provident Fund Account and is more beneficial to taxpayer as compared to investments in National Savings Certificates. In terms of present rate of interest, it is more beneficial as compared to deposits in Public Provident Fund Accounts.