Investment
made in "five year time deposit in an account under Post Office Time
Deposit Rules, 1981" will be eligible for deduction from the Gross
total income, under section 80C, with the overall section threshold of
1 Lakh.
The
additional point to be noted is "The amendment shall apply to
investments, as above, made during the financial year 2007-08 and subsequent
years."
Below
is the summary of the Finance bill presented in the budget:
Enlargement of the scope of eligible saving instruments under section
80C
Section
80C of the Income-tax Act provides for a deduction of upto rupees one lakh to
an individual or a Hindu undivided family (HUF) for,-
(i)
making investments in certain saving instruments; or
(ii)
incurring expenditure on tuition fee and repayment of housing
loan.
With
a view to encourage small savings, it is proposed to enlarge the
scope of eligible saving instruments by inserting two new clauses in
sub-section (2) of section 80C. The following investments made by the assessee,
during the previous year, shall be eligible for deduction under section 80C
within the overall ceiling of rupees one lakh:-
(i)
five year time deposit in an account under Post Office Time Deposit Rules,
1981; and
(ii)
deposit in an account under the Senior Citizens Savings Scheme Rules, 2004.
Further, it is also proposed to provide that where any
amount is withdrawn by the assessee from such account before the expiry of
a period of 5 years from the date of its deposit, the amount so withdrawn shall
be deemed to be income of the assessee of the previous year in which the amount
is withdrawn. The amount so withdrawn, accordingly, shall be liable to tax in
the assessment year relevant to such previous year.
The amount liable to tax
shall also include that part of the amount withdrawn which represents interest accrued
on the deposit. However if any part of the amount so received or withdrawn
(including the amount relating to interest) has suffered taxation in any of the
earlier years, such amount shall not be taxed again.