Financial Health Check

A relative opened a PPF account in the post office in her daughter’s childhood name. The daughter’s name has since undergone a change. The post office and other concerned departments were approached with an affidavit and other documents to effect the change in the name, but she was told that there was no provision for doing so. The daughter will soon be a major. In these circumstances, what should be done so that the PPF account continues to be maintained?
Chander Prakash

The PPF Account in the name of the minor daughter could be continued even after she becomes a major. It appears that the daughter has effected a change in her name while she is still a minor. The account, in view of the practical difficulties enumerated by you and the wooden-headed approach of the postal officials, could continue in her childhood name and maturity proceeds realised may be deposited in the account of child in the same name. In the alternative, you could consider closing the present account and thereafter open a new account in the new name.

This refers to the query on PPF nomination in IE on September 12, 2004. According to the PPF booklet issued by the Government of Maharashtra, the amount standing to the credit of the deceased will ‘continue to earn tax-free interest’ if left un-drawn by the nominee/legal heir.
D V Punwani

It is true that the PPF booklet issued by the authorities suggests that the deceased account could continue to earn tax free interest. However, practical considerations demand that when the account-holder is no more, the funds in the name of the deceased are soon withdrawn by the legal heirs to prevent complications arising from long lost relatives and heirs who tend to surface from nowhere. In any investment instrument, realisation of the principal should be far more important than the lure of returns, taxable or tax free, on such investments.

In your column ‘Financial Health Check’ dated September 26, 2004 you had stated ‘The time limit for outright purchases within one year before or two years after the sale of the first house’. I want to clarify that I have bought a second house property two months before the sale of my first house property. So will the amount paid by me for the purchased property be adjusted for consideration of capital gains in the sale of my sold property? According to your statement it should be so, but I want to be sure so please, please let me know.
G. Singh

Yes. Your understanding of my reply is correct. Your payment for purchase of a second flat within one year prior to sale of your first flat will qualify for the exemption from capital gains on your said first flat. You may confirm this by reading section 54 of the Income tax Act, 1961.

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