DelhiDesk The article provides advice to an individual who bought Kisan Vikas Patra (KVP) for Rs 20 lakhs in 2021 and has been paying income tax on the interest accrued every year. The article suggests that the individual may offer the interest income to tax on a cash basis at the time of maturity or on an accrual basis every year if they regularly adopt the mercantile system of accounting. The article also clarifies that no taxes are required to be deducted on the interest income at the time of maturity and any tax due is payable entirely as self-assessment tax/advance tax. Additionally, the article answers a question about whether a minor can open a public provident fund (PPF) account, stating that only a guardian on behalf of a minor is eligible to open a PPF account, and only one account can be opened in the name of a minor by any guardian.
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👉 In 2021, the person bought Kisan Vikas Patra (KVP) for ₹20 lakhs.
👉 They have been paying income tax on the interest accrued on this every year and including it in their income tax returns (ITRs).
👉 Since there’s no provision of tax deducted at source (TDS) on the interest earned by KVP, its consolidated interest will reflect in their 26AS and annual information statement.
👉 To avoid double taxation at the time of redeeming the KVP, they should offer the interest income earned from KVP on mercantile basis.
👉 In case of any inquiry about the mismatch of the interest income appearing in the AIS in the year of maturity vis-à -vis the interest income offered to tax in that year, the same may be explained on the basis of a reconciliation of the accrued amount offered to tax in past years’ tax return and necessary documentary evidence.
👉 As per the current provisions of section 194A of the Act, on maturity of the KVP, no taxes are required to be deducted on the interest income.
👉 An individual who is a minor can open a public provident fund (PPF) account, but only a guardian on behalf of a minor is eligible to open a PPF account.
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