Q. I am a senior citizen (65 years old) and a government pensioner. I get a fixed medical allowance (FMA) of ₹1,000 per month. I have cardiac and other health issues for which I have to incur expenses far more than monthly FMA. I do not have any medical insurance in my name. I have taken medical insurance for my spouse, covering heart ailments and cancer, for an annual premium of ₹7,347. Am I eligible for deduction of ₹7,347 as well as expenses incurred on my own medical issues in terms of Section 80 D of IT Act up to a limit of ₹50,000?
Subir Mukhopadhyay
A. Under section 80D of the I-T Act, for senior citizens, a deduction of ₹50,000 is available towards medical insurance and expenditure for self, spouse and dependants. Amount paid in the form of insurance premium for your wife amounting to ₹7,347 can be claimed as deduction under this section. In your case (being a senior citizen), as you do not possess any medical insurance in your name, medical expenditure actually incurred by you can be claimed under this section to the extent of ₹42,653.
Q. I have medical insurance of ₹37,000 per annum. I have been getting exemption under 80D of I-T Act. I am also incurring an expenditure of ₹13,000 per annum towards purchase of medicines for diabetes, osteoarthritis etc. duly prescribed by registered medical practitioner. Can I claim a further ₹13,000 towards above mentioned cost of medicines under 80D ?
One of my senior citizen friends does not have any medical insurance policy. Can he avail 80D of I-T towards the cost of medicines ?
K.K. Dey
A. For senior citizens, 80D deduction towards medical insurance premium is to an extent of ₹50,000 for self, spouse and dependent family members. Once any amount towards medical insurance is incurred and claimed for a person, the person shall not be eligible for expenses incurred towards their other medical expenses
However, if a senior citizen does not possess any medical insurance in his name thereby not claiming any medical insurance deductions , he is allowed to claim medical expenses incurred by him up to ₹50,000 for a year
Q. My friend is working in Rajasthan on deputation leaving his family in Chennai. Each month, he sends some amount to his wife through online transfer to her bank account for household and for medical expenses. His wife, after meeting her expenses, was able to save a considerable amount in FD in bank.
She is a housewife and a PAN holder. She submitted Form 15G and got interest income without deduction of tax. Even though her total income per year is less than ₹2 lakh, only from bank interest, must she file income tax returns?
Vaidyanathasamy
A. If an individual transfers assets without adequate consideration to his spouse, income arising from such assets shall be taxable in the hands of the transferor. In the given situation, interest arising from FD invested from funds of husband will be taxable in the hands of the husband though the same has been invested in the name of the wife. As a result, such income should be disclosed in the returns filed by her husband.
Q. I am a senior citizen living in Chennai. I sold my flat for ₹33 lakh in June 2019. The house was bought in January 2003 registered for a price of ₹3.07 lakh, stamp paper value ₹16,300, registration charges ₹6,140, woodwork etc. ₹1.50 lakh.
My income is as follows: EPF pension ₹8,436/year, LIC pension ₹13,440/year, bank interest to be earned by investment of gross amount of ₹26 lakh (33-7) would be ₹63,000 by March 2020.
I need your help to decide how much to invest in capital gains bonds provided by NHAI and REC under section 54 EC.
Would be great if you can provide with me with information regarding any exemptions for senior citizens
M. Dillibabu
A. Method of computation of capital gains in case of land and building which is residential in nature is as follows –
Full value consideration, i.e. the monies received from the buyer of the property minus any brokerage and other expenses that are wholly and exclusively incurred in connection with such transfer will be one limb of the transaction. Whereas, the other limb will comprise cost of acquisition of such property and the cost of improvements incurred post 01/04/2001.
The meaning under the Act for cost of acquisition is purchase price of the property as per sale deed, stamp and registration costs. Cost of improvement is all expenditure of capital nature incurred in making any additions or alterations to the capital asset; the cost of acquisition and cost of improvement are to be indexed in order to be adjusted with inflation, cost inflation index for respective years are to be used to do the same.
The excess/shortage of the first limb over the second limb (post indexation) is the capital gains taxable in your hands. If the period of holding of such property is above two years, then the nature of capital gains is long term and if not, it is short term.
For long-term capital gains, the tax rate is 20.8%, including cess and for short-term capital gains, the tax rate is in accordance with your slab rates.
In order to avail full exemption from tax by investing in prescribed bonds under section 54EC, you must invest the entire sum of capital gains in such bonds within six months up to ₹50 lakh before the end of the current year.
The lock-in period is five years and the same fetches an interest of 5.75% per annum.
As the asset sold is an house property (flat), you may opt to buy another house or flat within two years from the date of sale of the flat or construct another house within three years from the date of sale of the flat for getting exemption of Capital Gains (section 54)
With respect to your other income – EPF pension and LIC pension - is taxable under the head “income from other sources.”
Bank interest up to ₹50,000 is allowed as deduction in a year for senior citizens; over and above the limit, the same will be taxable under the head “income from other sources.”
Note to readers: Replies to queries with specifics will not be given in an open forum. Our experts will give specific advice only on verifying all the documents (both purchase, sale and also expenditure validity) and this is beyond the scope of this column as it amounts to professional consultancy.
Q. As an housewife, can I sell my gold and invest the money in a bank fixed deposit without attracting income tax ?
Priya Rajesh
A. Income tax in the form of capital gains is applicable on sale of gold and gold jewellery.
Q. I am a retired person receiving ₹1,200 per month from LIC under Jeevan Dhara policy. Please advise if I am eligible for exemption u/s 80CC of I-T Act.
Muthuvel Chidambaram
A. Jeevan Dhara is a deferred annuity plan offered by the LIC. Deduction under section 80CCC is available to assessees only at the time of payment of premium. However, at the time of payouts from LIC in the form of annuity pension, the same is taxable under the head “Income from other sources.”
( The author is a partner, GSS & Associates, Chartered Accountants, Chennai)
