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PERSONAL TAX: Keep documentary evidence for income disclosed and expenses claimed as deduction

Claim deduction in respect of the expenses solely incurred for the purpose of conducting such business/profession

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Chirag Nangia

Updated: Dec 20, 2018, 06:35 AM IST

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I work as a children's counsellor and largely operate from home. What can I claim as tax deduction? Can I claim for the books and toys I buy for the children? How can I claim tax deductions on conveyance? Will I have to show proof? 
– Shruti Mallik

Please note that you can report the income generated from the provision of counseling to the children as "income from business or profession" in you income-tax return and claim deduction in respect of the expenses solely incurred for the purpose of conducting such business/profession. However, it is pertinent to note that appropriate documentary evidence should be maintained in respect of the income disclosed and expenses claimed as deduction.

I and my wife both have Public Provident Fund accounts which mature in 2019. I am 60 years old and my wife is 57. If we both choose the option to continue with the scheme for another five years, please advise if the principal and accrued interest amounts on completion of these five years is entirely tax free in both the following scenarios-(a) Continue to contribute during these five years? (b) Do not contribute after completion of 15 years (c) Is there option to close account mid-way during the five year period? 
– S Mishra

After maturity, a subscriber has the option to extend the maturity period of the PPF account in a block of 5 years. It will continue to earn the prevailing interest rate even if you do not make any contributions.This request for extension must be given within a year of maturity in Form H. If you keep depositing without furnishing the Form for extension, the new deposits shall not earn interest and shall also not be eligible for deduction under section 80C. The maturity proceeds shall be tax free if the option to extend the PPF account is availed properly. During the five-year blocks, you can only withdraw once a year. However, the amount that can be withdrawn during the five years cannot not be more than 60% of the balance at the start of block.

I am 60 years and recently retired from a private sector company. My PF was held in a PF Trust managed by the company. Even after retirement I continue to maintain my PF account with the trust as I have been advised that I can withdraw my corpus without tax for up to 36 months from my last date of employment and that my corpus will continue to earn interest. My corpus is upwards of Rs 1 crore and the trust earns interest of about 9%. But there has been some talk of government changing rules and the corpus being taxed if it is continued beyond retirement. So, I want to know, should I withdraw my corpus now ? How likely are the new rules likely to be with retrospective effect? Is it likely that no interest will accrue post cessation of employment or interest will accrue but will be taxed as other income? 
– Sunil M

Any amount accumulated in respect of a person who retires from employment after attaining the age of 55 years does not apply for withdrawal of the amount within a period of 36 months, shall be transferred to an account called an inoperative account as per the EPF Scheme. Interest shall not be credited to the account once it becomes inoperative. If you have rendered continuous services for a period of 5 years, the accumulated balance of the provident fund shall have no tax implications. It would be difficult to comment whether the new rules will be introduced with retrospective effect or prospectively. Withdrawal from the Provident Fund should entirely be your own decision.

The writer is Director, Nangia Advisors LLP

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