Liability of the trustees u/s. 53(1)(b) of the Estate Duty Act-Payment to be made to legal heirs/nominees of the deceased members of provident funds, etc.-Clarification regarding - Income Tax - 263/1979

Liability of the trustees u/s. 53(1)(b) of the Estate Duty Act-Payment to be made to legal heirs/nominees of the deceased members of provident funds, etc.-Clarification regarding Circular 263 Dated 29/11/1979 To All Controllers of Estate Duty, All Commissioners of Income-tax. Sir, Subject: Liability of the trustees u/s. 53(1)(b) of the Estate Duty Act-Payment to be made to legal heirs/nominees of the deceased members of provident funds, etc.-Clarification regarding. Section 53(1)(b) of the Estate Duty Act makes trustees of a provident fund accountable for the estate duty to the extent of the assets of the deceased which have at any time been under their management. The trustees of the provident fund, therefore, insist upon the estate duty clearance certificate before paying the amount standing to the credit of a deceased employee. 2. In order to remove hardship experienced by the legal heirs of the deceased wage-earners in getting payments of the accumulated balances in their provident fund accounts, etc., the Board have taken the following steps from time to time: (i) The Board issued two circulars in the past, namely, No. 2 of 1956 and No. 1 of 1967, in view whereof if the trustees make payment to the extent of Rs. 5,000 without the production of clearance certificate, the duty payable, if any, is first collected from the other property left behind by the deceased subscriber. (ii) The Board considered and approved, in 1975, a scheme framed by the Central Board of Trustees of the Central Provident Fund and forwarded by the Ministry of Labour and Employment. Under the said scheme, the balance to credit of the deceased member of the provident fund could be paid to the claimant without the production of estate duty clearance certificate, provided:- (a) the balance did not exceed Rs. 10,000; (b) the claimant filed an affidavit to the effect that the property passing on the death of the deceased member did not attract estate duty; (c) the claimant furnished an indemnity bond undertaking to indemnify the Central Board of Trustees against any liability on account of estate duty that may arise due to payment of provident fund accumulations. The scheme further envisaged that if eventually any payment was claimed by the estate duty authorities due to any liability arising under the Estate Duty Act, the liability would be met from the Reserve and Forefeiture Account of the Fund and realised subsequently by the trustees, wherever possible, from the payees on the strength of the indemnity bond furnished by them. (iii) the Ministry of Labour requested the Board in 1976 to increase the limit of Rs. 10,000 to Rs. 25,000. The Board approved of the said proposal. The payment of provident fund accumulations was, of course, subject to the same conditions as in (ii) above. (iv) The Board, at the request of the Ministry of Labour, gave its concurrence in 1977 to the same procedure being followed in setting the cases under Employees' Deposit-linked Insurance Scheme, 1976, and Coal Mines Deposit-linked Insurance Scheme, 1976, as is being done in the case of settlement of the provident fund accounts. It was decided that the insurance benefits under the two schemes up to Rs.5,000 may be paid direct to legal heirs/nominees without insisting upon estate duty clearance certificate. If the amount, however, exceeds Rs.5,000 but does not exceed Rs. 10,000, the claimant could submit an affidavit and an indemnity bond as is required for payments under the Provident Fund Scheme. 3. It may be clarified that even though, in view of the schemes approved by the Board as detailed in para. 2, the trustees can make payments up to certain limits without the productions of estate duty clearance certificate, their statutory liability remains unaffected. 4. The above should be brought to the notice of all the officers working in your charge for guidance and necessary action. Yours faithfully, (Sd.) V. Mathur, Under Secretary, Central Board of Direct Taxes.