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Q. A relative of mine, a senior citizen and a family pensioner, has interest income from post office small savings schemes such as Post Office MIS, FD, NSC and Senior Citizens Savings Scheme. I am told she is not eligible for standard deduction but that she can deduct 33% from her pension. I am also informed that exemption of interest up to ₹50,000 is applicable only to bank deposits and not to investments made by my relative. Please clarify.

T. K. Kannan

A. In case of family pension, standard deduction is not available. However, 1/3rd portion of the family pension received or ₹15,000, whichever is less, will be treated as exempt.

The remaining portion of the family pension will be taxed under the head ‘Income from Other Sources.’

TDS is not required to be deducted by banks, co-operative societies and post office if the interest payable to such senior citizen is less than ₹50,000 in one assessment year.

Further, in the case of banks and co-operative societies, the limit of ₹50,000 will be available for each branch in cases where deposits are maintained in different branches.

Q. I purchased a plot of residential land during the FY 2004-05 for ₹8 lakh. I sold the same plot in October 2020 for ₹1.57 crore. The purchaser deducted TDS of 0.75% on the sale value. How much will be the capital gains on this transaction?

If I invest the capital gains amount in a bank’s capital gains account, can I claim refund of the TDS amount deducted on the sale proceeds?

I purchased a flat for ₹20 lakh in 2007 and I do not have any other property in my name.

N.R.B. Patnaik

A. Sale of immovable property in the form of land will be termed a ‘Capital Asset’ and the ensuing gain/loss from the sale transaction is termed as ‘Long Term Capital Gain/Loss’ as the period of holding is above 24 months.

The capital gains is computed in the following manner — the first limb will consist of selling price less brokerage. Also, if the selling price is lesser than the guideline value, then the guideline value is to be replaced with the selling price.

Kindly check with the registrar’s office in order to ascertain the guideline value of the property for the corresponding address/survey number.

The second limb will consist of purchase cost plus registration costs which is to be adjusted with inflation (indexation). This is to be done with the aid of Cost Inflation Index (CII) released by the I-T department every assessment year. If you have incurred any cost of improvement, then the same can also be added along with the purchase cost (adjusted with CII, if applicable).

If the difference between the first and second limbs is positive, it is Capital Gains and if not, it is Capital Loss. Long Term Capital Gains attract 20% tax plus applicable surcharge and cess. In case of loss, the same can be carried forward for 8 assessment years and be adjusted with any future Long Term Capital Gains.

The TDS so deducted by the buyer can be adjusted with the corresponding tax payable. You may choose to avail exemption under Section 54F (reinvestment in house property) or 54EC (investment in capital gains bond scheme); in case the value of the investment under the aforementioned exemptions are higher than the Capital Gains, you may claim the refund of the TDS, if you do not have any other source of income. You may also choose to deposit the proceeds into a Capital Gains Deposit Scheme and invest the proceeds within the time limits prescribed under the respective exemption provisions and claim the refund of the TDS deducted for this assessment year in case you do not have any other source of income.

Q. My wife and I are aged 70 and 72 respectively. We are both individual income tax assessees and have a single medical insurance policy having an equal sum insured. Since mine happens to be the first name in the policy, the policy and Section 80D certificates are issued in my name. Suppose my wife, whose name is second in the policy, pays the insurance premium, is she eligible to claim the deduction under Section 80D, even if the 80D certificate is issued in my name?

As both are senior citizens, can she deduct up to ₹1,00,000 under Section 80D or is it restricted to ₹50,000 even if the premium in this case is say, ₹65,000? Please clarify.

L. Paramahamsan

A Under Section 80D of the Income Tax Act, 1961, senior citizens are allowed a deduction of up to ₹50,000 towards the medical insurance premium paid by them for themselves and their family (spouse and dependent children).

Deduction with respect to medical insurance paid by your wife can be claimed by her at the time of filing her ITR. You may also request your insurer to provide an 80D certificate in your wife’s name.

A maximum amount of ₹50,000 can only be claimed as deduction as the limit prescribed is for self, spouse and dependent children in case of senior citizens. You may from the next financial year take individual policies for each other and make payments individually in order to claim a maximum deduction of ₹50,000 in each case.

(N. Sree Kanth is partner, GSS & Associates, Chartered Accountants, Chennai)

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Printable version | Dec 7, 2021 7:56:03 PM |

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