TAX TALK- 31.08.2009-THE HITAVADA
TAX TALK
BY CA. NARESH JAKHOTIA
(Chartered Accountant)
“DEDUCTION TOWARDS REIMBURSEMENT OF MEDICAL EXPENDTIURE …..”
Query 1]
Sir, We are a private limited company. We are paying salary to employees in the break up of Basic, HRA, Conveyance & Medical allowance.I want to ask is any deduction available in respect of medical allowances (paid as salary)or entire amount of medical allowance is taxable? What about the taxability of other items like HRA, Conveyance, and Basic? [dineshsinghgaharwar@rediffmail.com]
Opinion:
1. Medical Allowance: a) Only reimbursement of medical expenses up to Rs. 15,000/- is exempt from income tax. Amount received over and above Rs. 15,000/- is taxable as “Income From Salary”. b) Fixed Medical allowance is taxable in the hand of employee. It is not plainly exempt from income tax even if it is actually expended for medical treatment by the employee.
2. House Rent Allowance (HRA): In respect of HRA, the least of the following is exempt from tax u/s 10(13A):(a) 40% of salary (50% for Mumbai, Kolkata, Delhi and Chennai).(b) HRA for the period the house is occupied by the employee.(c) The excess of rent paid over 10% of salary. However, an employee living in his own house or where he does not pay any rent is not eligible for this exemption.
3. Conveyance Allowance: Any allowance granted to meet the expenditure incurred on conveyance in performance of duties of an office or employment of profit is fully exempt from tax u/s. 10(14) read with Rule 2BB (1)(c). However, transport allowance for commuting between residence and place of duty is exempt up to Rs 800/- per month.
4. Basic:
It is taxable.
Query 2]
I shall be thankful if I am enlightened on the following points:
1. I have learned through bank sources that interest earned on recurring deposit with bank and on saving deposit are not taxable. Quarterly or Monthly interest on bank FDR if put in recurring deposit which will also earn interest further is also not taxable. If this is true, please quote the relevant clause of exemption.
2. How long do we need to keep our investment records after filling IT returns? Please reply [ ideepakarora@gmail.com ]
Opinion:
1. Interest income from bank FDR, Interest on R.D. A/c with banks, Interest on saving bank deposit is taxable. Also, interest on bank FDR invested in bank RD A/c is taxable. The further income by way of interest on R.D A/c is also taxable.
2. In normal course, the record for investment/ income should be kept for a minimum period of six years.
Query 3]
I am working for State Government PSU. I have received medical reimbursement of Rs. 2,00,000/- for my angioplasty from my office. As per exiting rules of our office, medical reimbursement above Rs 15,000/- is taxable. I have learnt that there is exemption in Income tax for complete amount in case of special diseases u/s 80DDB. Please clarify and give details. [Sachin Date]
Opinion:
1. Only reimbursement of medical expenses up to Rs. 15,000/- is exempt from income tax. Amount received over and above Rs. 15,000/- is taxable as “Income From Salary”.
2. Deduction u/s 80DDB :The deduction u/s 80DDB is available if the expenses for the medical treatment of specified disease or ailment is incurred by assessee on himself or on dependant. The specified disease for the purpose of section 80DDB is prescribed in Rule 11DD as under: 11DD. (1) For the purposes of section 80DDB, the following shall be the eligible diseases or ailments : (i) Neurological Diseases where the disability level has been certified to be of 40% and above,— (a) Dementia ; (b) Dystonia Musculorum Deformans ; (c) Motor Neuron Disease ; (d) Ataxia ; (e) Chorea ; (f) Hemiballismus ; (g) Aphasia ; (h) Parkinsons Disease ; (ii) Malignant Cancers; (iii) Full Blown Acquired Immuno-Deficiency Syndrome (AIDS) ; (iv) Chronic Renal failure ; (v) Hematological disorders : (i) Hemophilia ; (ii) Thalassaemia.
The angioplasty treatment undergone by you does not appear to fit into the diseases and ailments mentioned in the said Rule. You will, therefore, not be able to claim deduction in respect of the expenditure on medicines incurred. Query 4]
A gift (Immoveable Property) is given by Mother in law to her daughter jointly with Son in law. In such case whether Son in law can be treated as "Relative" under IT Act ? And hence 50% value of the property attributable to him will not be treated as income. Please clarify. [AVR]
Opinion:
Son-in-law is a “Relative” for the purpose of section 56(2) (vi) of the Income Tax Act-1961. Hence gift to son-in-law is law is not treated as income of the receiver.
Further, presently gift in kind (like property, jewellery etc) is outside the purview of section 56(2)(vi). However, the provision is amended by the recent union budget to treat gift in kind as income u/s 56 with effect from 01.10.2009.
BY CA. NARESH JAKHOTIA
(Chartered Accountant)
“DEDUCTION TOWARDS REIMBURSEMENT OF MEDICAL EXPENDTIURE …..”
Query 1]
Sir, We are a private limited company. We are paying salary to employees in the break up of Basic, HRA, Conveyance & Medical allowance.I want to ask is any deduction available in respect of medical allowances (paid as salary)or entire amount of medical allowance is taxable? What about the taxability of other items like HRA, Conveyance, and Basic? [dineshsinghgaharwar@rediffmail.com]
Opinion:
1. Medical Allowance: a) Only reimbursement of medical expenses up to Rs. 15,000/- is exempt from income tax. Amount received over and above Rs. 15,000/- is taxable as “Income From Salary”. b) Fixed Medical allowance is taxable in the hand of employee. It is not plainly exempt from income tax even if it is actually expended for medical treatment by the employee.
2. House Rent Allowance (HRA): In respect of HRA, the least of the following is exempt from tax u/s 10(13A):(a) 40% of salary (50% for Mumbai, Kolkata, Delhi and Chennai).(b) HRA for the period the house is occupied by the employee.(c) The excess of rent paid over 10% of salary. However, an employee living in his own house or where he does not pay any rent is not eligible for this exemption.
3. Conveyance Allowance: Any allowance granted to meet the expenditure incurred on conveyance in performance of duties of an office or employment of profit is fully exempt from tax u/s. 10(14) read with Rule 2BB (1)(c). However, transport allowance for commuting between residence and place of duty is exempt up to Rs 800/- per month.
4. Basic:
It is taxable.
Query 2]
I shall be thankful if I am enlightened on the following points:
1. I have learned through bank sources that interest earned on recurring deposit with bank and on saving deposit are not taxable. Quarterly or Monthly interest on bank FDR if put in recurring deposit which will also earn interest further is also not taxable. If this is true, please quote the relevant clause of exemption.
2. How long do we need to keep our investment records after filling IT returns? Please reply [ ideepakarora@gmail.com ]
Opinion:
1. Interest income from bank FDR, Interest on R.D. A/c with banks, Interest on saving bank deposit is taxable. Also, interest on bank FDR invested in bank RD A/c is taxable. The further income by way of interest on R.D A/c is also taxable.
2. In normal course, the record for investment/ income should be kept for a minimum period of six years.
Query 3]
I am working for State Government PSU. I have received medical reimbursement of Rs. 2,00,000/- for my angioplasty from my office. As per exiting rules of our office, medical reimbursement above Rs 15,000/- is taxable. I have learnt that there is exemption in Income tax for complete amount in case of special diseases u/s 80DDB. Please clarify and give details. [Sachin Date]
Opinion:
1. Only reimbursement of medical expenses up to Rs. 15,000/- is exempt from income tax. Amount received over and above Rs. 15,000/- is taxable as “Income From Salary”.
2. Deduction u/s 80DDB :The deduction u/s 80DDB is available if the expenses for the medical treatment of specified disease or ailment is incurred by assessee on himself or on dependant. The specified disease for the purpose of section 80DDB is prescribed in Rule 11DD as under: 11DD. (1) For the purposes of section 80DDB, the following shall be the eligible diseases or ailments : (i) Neurological Diseases where the disability level has been certified to be of 40% and above,— (a) Dementia ; (b) Dystonia Musculorum Deformans ; (c) Motor Neuron Disease ; (d) Ataxia ; (e) Chorea ; (f) Hemiballismus ; (g) Aphasia ; (h) Parkinsons Disease ; (ii) Malignant Cancers; (iii) Full Blown Acquired Immuno-Deficiency Syndrome (AIDS) ; (iv) Chronic Renal failure ; (v) Hematological disorders : (i) Hemophilia ; (ii) Thalassaemia.
The angioplasty treatment undergone by you does not appear to fit into the diseases and ailments mentioned in the said Rule. You will, therefore, not be able to claim deduction in respect of the expenditure on medicines incurred. Query 4]
A gift (Immoveable Property) is given by Mother in law to her daughter jointly with Son in law. In such case whether Son in law can be treated as "Relative" under IT Act ? And hence 50% value of the property attributable to him will not be treated as income. Please clarify. [AVR]
Opinion:
Son-in-law is a “Relative” for the purpose of section 56(2) (vi) of the Income Tax Act-1961. Hence gift to son-in-law is law is not treated as income of the receiver.
Further, presently gift in kind (like property, jewellery etc) is outside the purview of section 56(2)(vi). However, the provision is amended by the recent union budget to treat gift in kind as income u/s 56 with effect from 01.10.2009.
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