The CBDT has issued Notification No. 08/2017 dated 13th, September, 2017 in which it has explained the law relating to TDS on interest on deposits made under the Capital Gains Accounts Scheme, 1988 where the depositor has deceased
Government of India
Ministry of Finance
Central Board of Direct Taxes
Directorate of Income-tax (Systems)
New DelhiNotification No. 08/2017 New Delhi,
13th, September, 2017Subject: — TDS on interest on deposits made under the Capital Gains Accounts Scheme, 1988 where the depositor has deceased — reg.—
It has been brought to the notice of CBDT that in cases of deceased depositor who has made deposits under the Capital Gains Accounts Scheme, 1988; the banks are deducting TDS on the interest earned on such deposits in the hand of the deceased depositor and issuing TDS certificates in the name of the deceased depositor, which is not in accordance with the law. Ideally in such type of situations, the TDS certificate on the interest income for and upto the period of death of the depositor is required to be issued on the PAN of the deceased depositor and for the period after death of the depositor is required to be issued on the. PAN of the legal heir.
2. Under sub-rule (5) of Rule 31A of the Income-tax Rules, 1962, the Director General of Income-tax (Systems) is authorized to specify the procedures, formats and standards for the purposes of furnishing and verification of the: statements or claim for refund in Form 26B and shall be responsible for the day-to-day administration in relation to furnishing and verification of the statements or claim for refund in Form 268 in the manner so specified.
3. In exercise of the powers delegated by the Central Board of Direct Taxes (Board) under sub-rule (5) of Rule 31A of the Income-tax Rules, 1962, the Principal Director General of Income-tax (Systems) hereby specifies that in case of deposits under the Capital Gains Accounts Scheme, 1988 where the depositor has deceased:
(i) TDS on the interest income accrued for and upto the period of death of the depositor is required to be deducted and reported against PAN of the depositor, and
(ii) TDS on the interest income accrued for the period after death of the depositor is required to be deducted and reported against PAN of the legal heir,
unless a declaration is flied under sub-rule(2) of Rule 37BA of the income-tax Rules,. 1962 to that effect.
4. This issues with approval of the Principal Director General of Income-tax (Systems).
Dy. Commissioner of Income-tax (CPC-TDS)
RIDER At the cost of a painful personal attempt, to drive home the not-so-obvious ‘problem’- though, most certainly, not so difficult as to identify by anyone through a close but insightful study of the scheme of the provisions of relevance herein-suggest to look up HERE https://www.linkedin.com/pulse/tds-nd-tax-return-deceased-deductee-swaminathan-venkataraman
(AND the related Previous Posts cross-referred therein)
OFFHAND
In one’s independent perspective, the clarification has not come a day soon. For, the rightly faulted practice,- in a manner of speaking, in an apparent violation of the extant scheme of the applicable provisions of the law (the Act rw the rules),- which has now been sought to be clarified and remedied,has been a matter of grave concern and grievance.
To Add:
A) The clarification, in terms, limits itself to interest on special bank deposit (of a decaesed holder) for exemption of CGT. In fact, that should apply, in general, to interest earned on any bank or other deposit account of a deceased holder.
B) “…..and for the period after death of the depositor is required to be issued on the PAN of the LEGAL HEIR” (FONT supplied- to focus on).
This point (that is,the wrong emphasis on ‘legal heir’) brings to surface,yet again,the same problem personally cautioned against, repeatedly before; to know more,and for an intimate appreciation of the point in one’s mind,suggest to look up the viewpoints canvassed and shared through earlier Posts, available in public domain, on a diligent search.
Regrettably,the requisite remedial steps,suggested repeatedly earlier, crying for long- by way of plugging in the necessary correctives in the ‘CPC’ – do not seem to have been taken till date !
The question that arises is whether the interest arising after the death becomes income of the legal heir ?. I think it continues to remain as income of the estate of the deceased and not that of the legal heir.
Legal heir who enters into the shoes of the deceased for compliance purposes in respect of the estate of the deceased, in any case has to claim the credit for TDS for the period before death. He may as well claim credit in the name of the deceased (though it is the estate that really receives the interest) for the period after death without going through the procedural hassles. This clarification may require a re-look.