Q. I am a government employee and my parents are senior citizens. The upper limit for medical expenditure/insurance in respect of senior-citizen parents is ₹50,000. Further, for individuals, the limit is ₹25,000.
1. Kindly help clarify whether one can claim the benefit of ₹50,000 deduction for medical expenditure under 80D for parents only for certain specified illnesses or for any regular treatment from a recognised hospital or medical practitioner.
2. Since I am covered under government and private insurance, can I claim deduction for my medical expenditure (for which I have not claimed benefits either from the government or from the private insurer) apart from the insurance premium? If yes, then why doesn’t the ITR page provide space for the filling up of personal expenditure details? Kindly also suggest further reading to have in-depth idea of benefits under 80D.
Ayodhya Sahu
N. Sree Kanth replies:
A. For non-senior citizens, deduction is available only for medical health insurance premium paid for themselves and dependent family up to ₹25,000. However, you may claim expenses incurred for preventive health check-up up to ₹5,000 for yourself and dependent family subject to the overall limit of ₹25,000.
You may refer Section 80D of the Income Tax Act, 1961 for an in-depth idea.
(N. Sree Kanth is partner, GSS Associates, Chartered Accountants, Chennai)
Q. My mother is a beneficiary of family pension. Her 80C & 80D are full and I was looking to invest in NPS to get benefits under 80CCD. Please advise whether beginning investments into NPS at age 58 is advisable. Are there other investment options to save on tax?
Vivek Keshri
Vidya Bala answers:
A. While NPS investment is allowed till the age of 65, we think liquidity is more important for her at this stage than saving tax. Consider investing in a mix of short-term FDs and low-risk, short-term debt mutual funds from which she can withdraw money when she wants to. With debt funds, tax efficiency will kick in after three years when it becomes long term in nature and she can get long-term capital gain indexation benefit.
However, if you are still keen that she enters NPS, make sure you invest only in the corporate bond and gilt options instead of equity. Also note that there will be compulsory part-annuity conversion requirement. You cannot fully withdraw the amount.
Q. I am a retired senior citizen, aged 71. I have invested about 50% of the retirement corpus (along with my wife) in major PSBs and NBFCs. The balance is distributed among SCSS (maximum limit reached), LIC Vaya Vandana scheme (earlier scheme), PPF, RBI (7.75%) bonds, and debt funds. Some of our bank and NBFC FDs will mature soon. Bank and NBFC interest rates are coming down sharply. Kindly advise on other secure investment options available (regular income) with better returns, as we are dependent on our interest income.
(Name withheld on request)
A . In the current rate scenario, RBI Floating Rate Bond 2020 is a superior option. And if rates do go up, you will see this bond paying you higher rates as it is a floating-rate instrument. So, lock more into this. Next, lock into 6-12-month bank fixed deposits, low rates notwithstanding. When they mature, chances are that rates will be up. You can lock into longer duration, then. Some near-term income sacrifice may be necessary to ensure your capital is safe. You will benefit once the rate cycle moves up.
Q. I am 38 years old, currently working with a private company and earning ₹54,000 per month. I am paying ₹1,10,936 as LIC premium. I pay ₹24,000 annually towards PPF, Sukanya Samriddhi scheme ₹36,000 and SIP ₹2,000 per month. I have three daughters. Kindly advise whether my existing financial plan is good, or if I need to change anything to get better returns in future. (A majority of my existing LIC policies will be maturing by 2025).
Sajan
A. On your investments, you have chosen quality government schemes, but they account for less than 10% of your earnings.
A good chunk goes towards traditional policies. While we will be unable to comment on the policies without knowing the details, in general traditional policies earn low returns. Hence, if there are policies where you can discontinue premiums (check on the repercussions), please do that, and focus on increasing your investments to at least 15% of your income. PPF and Sukanya Samriddhi are good. If you can take risks, then add in equity mutual funds. Keep it simple by using passive index funds such as the Nifty 50 and small sums in passive international index funds (Nasdaq 100 or S&P 500).
(Vidya Bala is Co-founder, Primeinvestor.in )
