Minors Without Taxable Income Need Not File ITR

Rajiv Singh, email

I want to gift Rs 10 lakh to my 7-year-old grandson for his future education. Can I open a Public Provident Fund (PPF) in his name as his guardian? Can I also apply for a Permanent Account Number (PAN) in his name, or should his father do it. Will an income tax return (ITR) be needed in his name?

You can open a PPF account for your grandson only if you are his legal guardian. Otherwise, his father (your son) will have to open and manage the account as the natural guardian.

A PAN card can be issued in the name of a minor, either by you or his father, but the application must include the details of the guardian managing the account. If you are the legal guardian, you can apply for the PAN card on his behalf.

Minors are not required to file ITRs unless they have taxable income, and PPF proceeds are tax-free. To open an account in the name of a minor, parents or legal guardians must provide KYC documents, proof of the minor’s age, and an initial deposit (minimum Rs 500). Contributions to a PPF account are capped at Rs 1.5 lakh per financial year.

Hina Shah, CFP® Luhem²Wealth

Ketaki Dave, email

I had booked an under-construction property with a Rs 1 lakh token deposit. The bank has disbursed Rs 20 lakh, out of the total laon, to the builder. Now I am thinking of buying a ready-to-move property at another location. Should I foreclose the loan or transfer it to another buyer? Will I owe capital gains tax on any lump sum from the new buyer?

You can foreclose your home loan by repaying the outstanding amount in one go. Most banks allow foreclosure any time after disbursement. As per the Reserve Bank of India (RBI) guidelines, floating rate loans usually have no foreclosure charges. However, fixed-rate loans may attract charges (typically 1-5 per cent). Once the dues are cleared and the required documents are submitted, the bank will close the loan and issue a no-objection certificate (NOC).

If you find a buyer for the under-construction property, and the bank and buyer (who fulfils bank’s eligibility criteria for loan) agree, the loan can be transferred.

Selling an under-construction property and receiving a lump sum may attract capital gains tax, depending on whether the gain is short term or long term. Under-construction properties have a grey area regarding the “date of purchase”, which affects tax calculation.

For tax purposes, keep detailed records of all the transactions and expenses related to the property.

Uma Chander, CFP®️ Handholding Financials

Ashish Apte, email

I have a trading and demat account in India. Now, I want to invest in foreign stocks. Can I buy stocks of foreign companies directly through my existing demat account? Can I ask my demat account provider to open an international demat account, if needed?

Yes, you can invest in foreign stocks through two modes, direct investment option and indirect investment option. Resident Indians are allowed to invest up to $250,000 per financial year.

However, investment done through mutual funds (MFs) does not have the same limit.

Under the direct investment option, Indian broking houses partner with international brokers for overseas trading, for which you can ask your existing broker. Some international broking firms also allow Indians to open an account and invest in foreign stocks.

Under the indirect investment option, you can invest in international MFs via fund of funds or exchange-traded funds, without an international trading account.

Another option is international stocks via the GIFT City, under the Liberalised Remittance Scheme with a limit of up to $250,000 per financial year. However, investing in foreign stocks are subject to forex rates fluctuations and wire transfer fees. Understand the tax implications clearly and report these investments while filing income tax returns.

Suhel Chander, CFP® Handholding Financial