Only An Indian Citizen Can Maintain, Contribute To PPF Account

My daughter settled in the US after her wedding. She is an American citizen now. She had opened a Public Provident Fund (PPF) account while she was working in India. Can I deposit Rs. 1.5 lakh every year in her PPF account to keep it operative till maturity, or will she need to close it before maturity. I have my own PPF account where I deposit Rs. 1.5 lakh every year. 

Answer: According to the provisions of the Government Savings Promotion General Rules, 2018, which apply to PPF accounts, only a resident Indian citizen can open a PPF account. 

Even after the person becomes a non-resident under the income tax laws, he/she can continue to contribute to the PPF account as long as he/she retains his/her Indian citizenship. But this account cannot be extended beyond the initial period of 15 years. 

In case the accountholder ceases to be an Indian citizen, his/her PPF account is deemed to have been closed from the end of the month prior to the month the accountholder gives up his/her Indian citizenship. 

As for the interest on the balance in the PPF account, it will keep earning interest at the rate applicable to Post Office Savings Account till the time the account is closed. 

Since your daughter has given up her Indian citizenship, she will have to close her PPF account.

I want to dissolve my Hindu Undivided Family (HUF). It consists of me as the karta along with six coparceners. The HUF has investment in equity-linked savings scheme (ELSS), which are under lock-in presently. Now that I wish to dissolve the HUF, can I distribute the assets, excluding ELSS investment? Or should I dissolve the HUF once the lock- in period of the ELSS is over. 

Answer: An HUF can be partitioned fully or partially. For effecting full partition, all of its assets have to be distributed among its members. If only some of the assets are distributed, it is treated as partial partition. What you are planning to do is a partial partition of the assets of the HUF, leaving aside the ELSS investments for distribution later. 

There is no restriction on partial partition, but income tax laws do not recognise partial partition. For a partition of to be recognised under the tax laws, all the assets of the HUF have to be distributed. The distribution of assets among the members could be even or uneven or even lead to a few members not getting anything under the dissolution of the HUF with consent of all the members of the HUF.

Since partial partition is not recognised under the income tax laws, the income in respect of distributed assets under such partition will continue to be taxed in the hands of the HUF, even if it is received by the members. 

Moreover, for a partition to be recognised by the income tax department, you have to make an application to the jurisdictional officer for passing an order recognising full partition of the HUF.

The author is a tax and investment expert

(Disclaimer: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.)