8 Answers You Must Know To Claim Deduction For Medical Insurance!

Hello, My question is regarding the Deduction under section 80D for Premium paid on Medical Insurance. I work for an IT company, and the company has a tie up with a health insurance company to provide coverage for me, wife and kids, the premium for which is paid by the company. But I have taken additional coverage for my parents, for which the premium is paid by me, from my salary. Can this premium amount be considered for deduction under Section 80D ? What are the documents required to submit for this, while filing the tax return. AAshish K , Banglore

Can the employee claim 80D deduction on the Group mediclaim policy premium by the employer and the employee's premium deducted from his salary?Has the position changed after the amendment in 80D whereby the necessary condition of payment by cheque has been waived off.Manish Kumar Joshi

I am an Individual Paying Mediclaim of Rs 17,000/- for my spouse and myself and Rs20,000/- for my dependent mother who is a senior citizen . I would Like to know what would be the eligible amount of decuction U/s 80D i.e whether it would be a ) Rs 15,000/- ( for my spouse and myself ) + 20,000/- for my mother OR b ) only 15,000 /- OR c ) only Rs 20,000/- . Kindly advise .Jagdish Shah

1.Why is deduction u/s 80D allowed?

The deduction is allowed for

1. buying medical insurance , popularly known as Mediclaim policy.
2. Keeping in effect a medical insurance already bought.

2. How much deduction available?

1. If Mediclaim is bought for any person other than person having 65 years , then Rs 15,000.
2. If Mediclaim is for person having 65 years or more , Rs 20,000.

3. Who can claim deduction?
Individual and HUF making payments for medical insurance.

1. Individual can claim for self, wife, children and parents.
2. HUf can claim for Mediclaim policy on members.

4. What should be mode of payment of insurance premium?
Any mode other than cash will make one eligible for deduction u/s 80D.

5. If office deducts salary for medical insurance for employee and his family , whether the employee can claim deduction u/s 80D?

Yes, for the fact that
the mode of payment is any ,other than cash, and
It is employee who paid for himself or his family's insurance.

Get a certificate from the employer regarding deduction of amount for medical insurance purpose.You can claim to the extent the dedcution has been made by the employer for medical insurance subject to maximum RS 15,000

6.If an individual buys Mediclaim for himself and for his parents exceeding 65 years, how much can he claim as deduction?

Good question. Subsection 2 of section provides as under

(2) Where the assessee is an individual, the sum referred to in sub-section (1) shall be the aggregate of the following, namely:

(a) the whole of the amount paid to effect or to keep in force an insurance on the health of the assessee or his family as does not exceed in the aggregate fifteen thousand rupees; and
(b) the whole of the amount paid to effect or to keep in force an insurance on the health of the parent or parents of the assessee as does not exceed in the aggregate fifteen thousand rupees.

It is clear that an individual can claim deduction up to Rs 35,000 for medicalim insurance , if he makes insurance for his family and any parents exceeding 65 years.

7. Can somebody having invested the amount from income exempt from tax or by taking loan , claim deduction u/s 80 D?

No as per opening line in the section 80D , the payment should be only out of income chargeable to tax . Read the opening line :

80D. (1) In computing the total income of an assessee, being an individual or a Hindu undivided family, there shall be deducted such sum, as specified in sub-section (2) or sub-section (3), payment of which is made by any mode, other than cash, in the previous year out of his income chargeable to tax.

8. Can you get deduction u/s 80D for Overseas Mediclaim policy?

Yes, in author opinion , there in nothing in the provision u/s 80D which prohibits claim of deduction u/s 80D for medical insurance for overseas journey. The only requirement, as given in section 80D(5) is that the insurance companies issuing such overseas insurance should be one of these

(5) The insurance referred to in this section shall be in accordance with a scheme made in this behalf by

(a) the General Insurance Corporation of India formed under section 9 of the General Insurance Business (Nationalisation) Act, 1972 (57 of 1972) and approved by the Central Government in this behalf; or
(b) any other insurer and approved by the Insurance Regulatory and Development Authority established under sub-section (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999).

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Be Ready To Pay Tax On Surrender of ULIP or Pension Plan !

I had some Life Insurance Policies with SBI Life ( i)Under their Unit Linked Scheme (ii) Pension Scheme.After continuing for 3 years,I had to surrender the above policies as I needed money. Kindly advise me whether

1. whether surrender value will be be added to current year's income and taxable?
2. whether the value of the Units/ Investments or Profit thereon,purchased by the Insurance Company out of my policy premium and now,sold for effecting my surrender request will be required to be shown separately / added to Income for computing Tax.

Prabhat Dev Mondal , Patna

Your question relates to two types of investments -ULIP and Pension . While the units of ULIP are capital assets under I T Act , pension is not considered capital asset. Therefore , their treatment under I T Act is different. But before you do that it should be seen -what are the schemes under which the people generally invest in these kinds of product.

Unit Linked Insurance Plan (ULIP)

Investment under ULIP is eligible for deduction u/s 80C up to Rs 1 Lakh. Clause 5 of Section 80C states as under

(5) Where, in any
previous year, an assessee

(i) ............

(ii) terminates his participation in any
unit-linked insurance plan referred to in clause (x) or clause (xi)
of sub-section (2), by notice to that effect or where he ceases to participate
by reason of failure to pay any contribution, by not reviving his participation, before contributions in respect of such participation have been
paid for five years; or

then,

(a) no deduction shall be allowed to the assessee
under sub-section (1) with reference to any of the sums, referred to in clauses(i), (x), (xi) and (xviii) of sub-section (2), paid in such previous year; and

(b) the aggregate amount of the deductions of income so allowed in respect of the previous year or years preceding such previous year, shall be deemed to be the income of the assessee of such previous year and shall be liable to tax in the assessment year relevant to such previous year.

In plain word, if the ULIP is terminated or ceased to be participated by assessee , all the deduction claimed till the year of termination or participation shall be treated as income of the year in which surrender or termination of participation was effected by the assessee.

In your case , you surrendered the scheme within 3 years , therefore , aggregate deduction claimed till last year, will be added to your income as "income from other sources".

Capital Gains On Units Of ULIP

Since the units were held for more than one year , it is long term asset. In case , STT is deducted by the Mutual Fund company (SBI Life) , any gain shall be tax exempt u/s 10(38) . In case for any reason , STT was not deducted , compute long term capital gains by claiming indexation benefit. In all probability , there will be long term capital loss.

Pension Plan Surrender

Pension plans are approved for deduction u/s 80CCC of the I T Act. In case the pension plan which you subscribed was approved for 80CCC benefits , it is provided in I T Act under 80CCC that the surrender value shall be taxed in the year in which it is surrendered. Therefore, your surrender of pension plan shall be taxed as under

1. If you claimed deduction u/s 80CCC , then principal value .
2. Add the bonus or interest credited to you at the time of surrender.

Remember , if you did not claim deduction u/s 80CCC, only bonus or interest shall be added to your total income as income from other source and charged to tax.

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Can We Claim Deduction U/s 80G If Donation Was Deducted From Salary?

We have received one circular that the amount as donation will be deducted from our salary to pay to recognized charitable trust (which has 80G deduction number allotted by IT Department) for the hospitalization of cancer patient. Accordingly, amount is directly deducted from our salaries and the lump sum amount is paid by the Employer to that charitable trust through cheque. Charitable trust has issued 80G certificate in the name of the Employer and saying that employees can not claim deduction for this donation. My question is that "Can Employees claim deduction for this donation?" & How? Geeta Thakur , Mumbai

Yes, employees can claim deduction u/s 80G provided a certificate from the Employer is received in which employer states the fact that

1. It has not claimed the deduction u/s 80G

2. The contribution was made out of deduction from salaries of employees.

3. The quantum of deduction made from the employee whom the certificate is being issued.

If you get this certificate, keep it in record and claim the 80G deduction. Since no documents required to be attached with the return , the certificate kept in your record will come handy of the income tax department wants to verify such claims.

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Are Physical Disable Person Required To Have Proof Of Expenditure For Claiming Deduction ?

I am a handicapped ie.,deaf & dumb from birth. Also my spouse is handicapped ie.,deaf & dumb from birth. We are permanently deaf & dumb 100%. I am working as central govt employee and my spouse working in Public sector undertakings. I want to know if I have the eligibility to claim deduction u/s 80U and 80DD? . N Prakash , Chennai

Income Tax Act under section 80U provides deduction to a physical disable person . Section 80DD provides deduction to a person who is spending on physical disable person. Hearing impairment is a disability defined for the purpose of section 80U .Therefore , in your case and your wife's case , both of you can get deduction u/s 80U of the I T Act.

Do you require medical expenditure proof?

No , under section 80U , there is no requirement of medical expenditure. This is a deduction to a physical disable without any other condition than that the person claiming should obtain a certificate of being physical disable person from a prescribed medical authority. That is all one require to claim the deduction .The said provision is as under :

80U. (1) In computing the total income of an individual, being a resident, who, at any time during the previous year, is certified by the medical authority to be a person with disability, there shall be allowed a deduction of a sum of fifty thousand rupees :

Provided that where such individual is a person with severe disability, the provisions of this sub-section shall have effect as if for the words fifty thousand rupees, the words seventy-five thousand rupees had been substituted.

(2) Every individual claiming a deduction under this section shall furnish a copy of the certificate issued by the medical authority in the form and manner, as may be prescribed, along with the return of income under section 139, in respect of the assessment year for which the deduction is claimed :

What is the meaning of physical disability?

The Explanation given under section 80U defines meaning of physical disability as under

(a) disability shall have the meaning assigned to it in clause (i) of section 2 of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 (1 of 1996), and includes autism, cerebral palsy and multiple disabilities referred to in clauses (a), (c) and (h) of section 2 of the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999 (44 of 1999);

A list of disability covered under section 2 of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 (1 of 1996), is given here

What is severe disability?
Person suffering from severe disability gets higher deduction of Rs 75 ,000. Disability under I T Act means 40% disability whereas severe disability means when disability is certified to be 80% .

Is any form prescribed ?
Yes, the Form 10-IA is prescribed for persons suffering from autism, cerebral palsy or multiple disability and for others in the form prescribed vide notification No. 16-18/97-NI.1, dated the 1st June, 2001. You can get all about forms here

Who are the Certifying Medical Authorities?
As per Rule 11A of I T Rules, the certification must be done by any of the following

(i) a Neurologist having a degree of Doctor of Medicine (MD) in Neurology (in case of children, a Paediatric Neurologist having an equivalent degree); or

(ii) a Civil Surgeon or Chief Medical Officer in a Government hospital.

Therefore , answer to your specific question is that both of you can claim deduction u/s 80U upto Rs 75,000 each since both of you are suffering from 100% of disability.

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Can One Claim Deduction For Expense On More Than One Disable Dependant?

I have to file income tax return where the assessee has 3 medically disabled person i.e Father , Mother and Uncle (fathers brother). What is the process of getting deduction for the A.Y. 2007-08 , What is the amount and what is deduction. Pinky Sitalni

Since you have asked regarding three relatives who are physically disable and you want to get deduction for expense on their maintenance , I must opine first on the issue whether you are eligible for one patient or more than one patient who are your relatives and dependent on you.

I find the provision has used the word “a dependant” and “ a person with disability’ plain reading of which states that the deduction is allowed in case of one dependant t only. Read the opening lines of section 80DD

80DD. (1) Where an assessee, being an individual or a Hindu undivided family, who is a resident in India, has, during the previous year,
(a) incurred any expenditure for the medical treatment (including nursing), training and rehabilitation of a dependant, being a person with disability; or

Following points should be noted regarding claim of deduction u/s 80DD and also read this.

1. Section 80DD provides for deduction in case of an individual who spends on maintenance of physical disable person.
2. The physical disable person must be dependent on you.To know more on this , see this answer.
3. Types of physical disability covered are given here.
4. You will need to get certificate in prescribed forms. Different types of forms are required for different types of disability.Get Forms from here.
5. The prescribed authority for giving such certificates are: (i) a Neurologist having a degree of Doctor of Medicine (MD) in Neurology (in case of children, a Paediatric Neurologist having an equivalent degree); or (ii) a Civil Surgeon or Chief Medical Officer in a Government hospital.
6. The deduction allows is Rs 50,000 (Rs 75000) in case the disable person is suffering from severe disability.
7. person with severe disability means

• a person with eighty per cent or more of one or more disabilities, as referred to in sub-section (4) of section 56 of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 (1 of 1996); or
• 
  

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Why Is Pension Fund Investment Not A Great Tax Saving Move?

Under which section surrender value of pension plan is taxable ? Sanjay Chavan, Pune

The contribution in pension funds gives the investor deduction u/s 80CCC upto Rs 1,00,000 . However,the combined deduction under 80CCC + 80C + 80CCD is Rs 1,00,000.

Why is it not great tax saving ?

The scheme of pension funds of LIC or other private funds are not great tax saving instruments in comparison to other saving instruments because when you receive pension or surrender the fund and receive the amount , it is taxable in the year of receipt.

Read the provision given under section 80CCC (2) which is clear as far as taxation of pension or surrender value is concerned.

(2) Where any amount standing to the credit of the assessee in a fund, referred to in sub-section (1) in respect of which a deduction has been allowed under sub-section (1), together with the interest or bonus accrued or credited to the assessees account, if any, is received by the assessee or his nominee

(a) on account of the surrender of the annuity plan whether in whole or in part, in any previous year, or

(b) as pension received from the annuity plan,

an amount equal to the whole of the amount referred to in clause (a) or clause (b) shall be deemed to be the income of the assessee or his nominee, as the case may be, in that previous year in which such withdrawal is made or, as the case may be, pension is received, and shall accordingly be chargeable to tax as income of that previous year.

Even nominee is not spared from taxation!

Under which section is it taxable?
The computation of income is made under five heads as provided in section 14 of the I T Act. The fifth head is "Income from other sources" which is given as F in section 14 of the I T Act.The computation of income from other sources is given in section 56 of the I T Act. The opening lines of section 56 says:

56. (1) Income of every kind which is not to be excluded from the total income under this Act shall be chargeable to income-tax under the head Income from other sources, if it is not chargeable to income-tax under any of the heads specified in section 14, items A to E.

The surrender value of the pension fund or pension received from such pension funds (do not confuse this pension with pension from employers) are neither Salary nor business income nor house property income nor capital gains. Thus such an income is taxable under residuary head i.e "income from other sources"

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Can School Fee Treated As Perquisite Be Allowed Deduction U/s 80C ?

I am working in a school & getting 100% rebate on Tuition fee on my 2 children's fee. The amount of rebate is added as a perquisite in my gross salary which increase the amount of TDS on salary but I am not getting the rebate of the same under section 80C why ?. I have been told that since you are not paying the tuition therefore you will not get the rebate under section 80C. Please clear me is this rule is ok.When this amt is added to my salary then why can't I get the rebate on the same. Gayatri Bajpai

Section 17(2)(iii) clearly provides that the value of any benefit or amenity granted or provided free of cost or at concessional rate shall be taken as perquisite. Income Tax

Rule 3(5) states (5)

The value of benefit to the employee resulting from the provision of free or concessional educational facilities for any member of his household shall be determined as the sum equal to the amount of expenditure incurred by the employer in that behalf or where the educational institution is itself maintained and owned by the employer or where free educational facilities for such member of employees household are allowed in any other educational institution by reason of his being in employment of that employer, the value of the perquisite to the employee shall be determined with reference to the cost of such education in a similar institution in or near the locality. Where any amount is paid or recovered from the employee on that account, the value of benefit shall be reduced by the amount so paid or recovered:

Provided that where the educational institution itself is maintained and owned by the employer and free educational facilities are provided to the children of the employee or where such free educational facilities are provided in any institution by reason of his being in employment of that employer, nothing contained in this sub-rule shall apply if the cost of such education or the value of such benefit per child does not exceed Rs. 1,000 p.m.

Therefore, the treatment by your Employer of the free education value as perquisite which is taxable in your hand is justified.

What about deduction u/s 80C?

I feel you should get the deduction of amount u/s 80C for the amount of school fee pad by your employer and treated as perquisite . I support this view because the deduction u/s 80C is a relief to taxpayers. One of the deduction is for expense on tuition fee of children. The law requires that if tax payers spends on tuition fee of his/her children, he/she should be given deduction to that extent subject to limit of Rs 1 lakh.

In your case, the school fee has been treated as perquisite because it is treated as PAID to school by your employer. In other words, you have paid the school fee not directly , but employer paid the fee on your behalf . Therefore the school fee which has been taxed as perquisite in your hand was actually spent by you for your children's studies. So, in my opinion, tuition fee in the total amount of school fee which has been treated as perquisite should be given deduction u/s 80C .

The problem is that the neither the employer nor the assessing officer will agree with your logic. But if you fight at the appellate stage i.e before CIT(A) or Income tax tribunal, I feel a good lawyer can get you relief and all others a precedence .

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Is Distance Education Eligible For Deduction ?

Does a Distance learning course of Management via satellite also qualify for the aforesaid deduction? Rajesh ,Hyderabad
Is the tuition fees for M.B.A (Distance Education) paid for self is allowable for deduction u/s 80C of the Income Tax Act . Prem Kumar,Chennai
Do distance education fees gets IT exemption ? Ganesh R ,Banglore

Income tax Act provides two types of deduction for education . These are

1. Tuition fee paid for children u/s 80C subject to maximum Rs 1,00,000.
2. Interest on education loan for studies of self or spouse of children without any limit u/s 80E

Now the question raised is :whether correspondence or distance education is covered under those sections of the I T Act for thr purpose of claiming deduction? Let us see what is the meaning of "studies" for the purpose of section 80C and 80 E.
Section 80C(xvii) provides as under

(xvii) as tuition fees (excluding any payment towards any development fees or donation or payment of similar nature), whether at the time of admission or thereafter,

(a) to any university, college, school or other educational institution situated within India;

(b) for the purpose of full-time education of any of the persons specified in sub-section (4);

Section 80E
Subsection 3 of section 80E defines education in following words

(c) higher education means full-time studies for any graduate or post-graduate course in engineering, medicine, management or for post-graduate course in applied sciences or pure sciences including mathematics and statistics;

As can be seen the wording , in both the provisions put stress on "full time "education or studies which means that the course should not be "part time" . There is no distinction by delivery mechanism of imparting education. Distance education is different from the regular course is that the delivery of education may be a combination of ways-postal,electronic and class room. So, in my opinion , if the education is not "part time" , the deduction u/s 80C is claimable for all modes of getting education-whether it is correspondence or electronic or a combination of medium of delivery.

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Should DDO Insist Upon Evidence Of Payment For Deduction u/s 80DD?

I have query regarding Section 80E of Income Tax Act for the deduction of Interest paid on Higher Education Loan. One has not claimed as deduction interest paid on higher ed. loan in P.Y.2006-07 and filed return without claiming Section 80E. Now whether he can take benefit of the interest paid in 2006-07 while filling the return of A.Y.2008-09. Also please advise whether employer can consider the interest paid in P.Y. 2006-07 while deducting tax for the A.Y.2008-09 as same was not claimed and considered while deduction tax at source in A.Y.2007-08. So how an employee can get the benefit of unclaimed interest on higher ed. loan of A.Y.2007-08. Sabir F. Mulla , Ahmedabad

I do not think that the interest paid on educational loan for FY 2006-07 i.e Asst Yr 2007-08 can b e claimed in Asst Yr 2008-09. However , assessee has two ways to claim the deduction which he forgot to claim by mistake . These are

1. Filing Revised return
2. Filing application u/s 119(2)(b) of the I T Act.

Filing of Revised Return
Since the return pertains to Asst Yr 2007-08, there is still time for filing revised return u/s 139(5) of the I T Act . The provision u/s 139(5) sates as under

5) If any person, having furnished a return under sub-section (1), or in pursuance of a notice issued under sub-section (1) of section 142, discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier ..

Therefore, if assessee filed original return with in due date i.e July 2007 , he should file revised return immediately for which there is time upto 31/3/2009. This will solve his problem and he also get some refund he ha paid more tax.

Filing application u/s 119(2)(b) of the I T Act.

Income tax Act u/s 119(2)(b) provides a relief mechanism for these kind of omission to claim exemption or deduction or refund u/s 119(2)(b) of the I T Act. The said provision says

(b) the Board may, if it considers it desirable or expedient so to do for avoiding genuine hardship in any case or class of cases, by general or special order, authorise any income-tax authority, not being a Commissioner (Appeals)] to admit an application or claim for any exemption, deduction, refund or any other relief under this Act after the expiry of the period specified by or under this Act for making such application or claim and deal with the same on merits in accordance with law; So, if the assessee has forgotten to claim any deduction , he should apply before the Commissioner of income tax under whose jurisdiction his case falls . The application is to be made under plain paper.

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Is ELSS Better Option As A Tax Saving Investment ?

The crash of stock market in the month of March is good opportunity for investors to opt for Equity Linked Saving Scheme because unit price of those scheme shall also be lower on account of crash in stock market. That is not the only reason for recommending ELSS as an investments . The other reasons are

1. Claim Deduction upto Rs 1 lakh

Those readers who have still trying to search for an investment option for tax savings, can get deduction u/s 80C which by virtue of clause 2(xiii) gives deduction up to Rs 1 lakh .

2.Minimum lock in period.

The PPF or NSC gives you risk free returns but they have lock in period of six years, whereas ELSS has only 3 years of lock in period . SO , after three years only you can get your wealth back .

2. Tax free gains

While interest from PPF is tax free , interest from NSC is taxable. Whereas in case of ELSS, not only tax on the long term capital gains is tax free, even dividends you receive are tax free.

3. Chance of better returns

The prediction about Indian economy , makes a case for long term investment in equity. Therefore there is likelihood of getting much better return out of investment as the equity market is set to go up in near future again. The tax free gain will be more than the PPF or NSC. While the PPF or NSC gives you 8 % return , the return from ELSS on average annual return was more than 30% in last one year.

So what are those ELSS plans?

Given below is the list of ELSS which were ranked by ICRA for giving Award for performance of the fund . The rank was for performance by the ELSS funds for one year period ending 31/12/2007. Choose your own!

ELSS- One Year Performance

Rank For Year Ending 31/12/2007

1. PRINCIPAL Tax Savings Fund
2. Principal Personal Taxsaver
3. Birla SunLife Tax Relief 96
4. Kotak Taxsaver - Growth
5. DWS Tax Saving Fund - Growth
6. Sundaram BNP Paribas Taxsaver -
7. (Open Ended Fund) - Growth
8. Fidelity Tax Advantage Fund - Growth
9. SBI Magnum Tax Gain Scheme 93 - Growth
10. UTI Equity Tax Savings Plan - Growth
11. ABN AMRO Tax Advantage Plan - Growth
12. Birla Equity Plan - Growth
13. Franklin India Taxshield - Growth
14. Tata Tax Saving Fund
15. HDFC Taxsaver - Growth
16. Reliance Tax Saver Fund - Growth
17. HDFC Long Term Advantage Fund - Growth
18. ING Tax Saving Fund - Growth
19. ICICI Prudential Taxplan - Growth

[ Ranking Source :ICRA Mututal Fund Award ]

Great Tax Planning!

After three years sale those units , get tax free redemptions and invest in ELSS again to claim the tax deduction. You will never be short of funds for tax saving purpose!

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One Insurance Policy, Two Claimants Of Deduction U/s 80D Possible Now !

Budget 2008 -Fine Prints

3

Budget 2008 has brought some very nice changes in section 80 D . These are :

1. Additional Rs 15,000 for medical insurance on parents. If the insured parent is senior citizen , additional insurance amount is Rs 20,000 (Not Rs 15,ooo)
2. Parents need not be dependent on the assessee.
3. If part payment is done by you and part payment by the parent, both can claim deduction to the extent of their contribution subject to maximum allowed.

Read the reason with example for such an amendment by the Government as given in Memorandum to Finance Bill 2008

"Section 80D of the Income-tax Act provides for a deduction of up to fifteen thousand rupees to an assessee, being an individual or a Hindu undivided family. The deduction is allowed for making a payment to effect or keep in force an insurance on,-

(a) the health of the assessee or on the health of the wife or husband, dependent parents or dependent children of the
assessee where the assessee is an individual;

(b) the health of any member of the family where the assessee is a Hindu undivided family.

In case the assessee or any other member of the family, on whose health the insurance has been effected or kept in force, is a senior citizen, the deduction allowed is up to twenty thousand rupees. The existing provisions also have the requirements that the payment must be through a mode other than cash and should be out of the taxable income of the assessee. Since health insurance cover for the elderly comes at a relatively higher price, it is necessary to encourage individual assessees to supplement the efforts of their parents in getting themselves medically insured.

Accordingly, it is proposed to allow an additional deduction of up to fifteen thousand rupees to an assessee, being an individual, on any payment made to effect or keep in force an insurance on the health of his parent or parents. The existing condition of ‘dependent’ with respect to parents is being dispensed with. This deduction shall be in addition to the existing deduction available to the individual assessee on medical insurance for himself, his spouse and dependent children. Further, it is proposed that if either of the individual assessee’s parents, who has been medically insured, is a senior citizen, the deduction would be allowed up to twenty thousand rupees.

For example, an individual assessee pays (through any mode other than cash) during the previous year medical insurance premia as under:

(i) Rs 12,000/- to keep in force an insurance policy on his health and on the health of his wife and dependent children;
(ii) Rs 17,000/- to keep in force an insurance policy on the health of his parents.

Under the proposed new provisions he will be allowed a deduction of Rs 27,000/- (Rs. 12,000/- + Rs. 15,000/-) if neither of his parents is a senior citizen. However, if any of his parents is a senior citizen, he will be allowed a deduction of Rs 29,000/-
(Rs.12,000/- + Rs.17,000/-). Whether the parents are dependent or not, is not a consideration for deciding the deduction under the
proposed new section.

Further, in the above example, if cost of insurance on the health of the parents is Rs 30,000/-, out of which Rs 17,000/- is paid(by any non-cash mode) by the son and Rs 13,000/- by the father ( who is a senior citizen), out of their respective taxable income, the
son will get a deduction of Rs 17,000/- ( in addition to the deduction of Rs 12,000/- for the medical insurance on self and family) and the father will get a deduction of Rs 13,000/-.

This amendment will take effect from the 1st day of April, 2009 and will accordingly apply in relation to assessment year 2009-
10 and subsequent assessment years."

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Seven Points One Must Know Before Investing In FD for Deduction u/s 80C!

1. Who can buy these FDR?

Individual or HUF  can get deduction u/s 80C  for buying Fixed Deposit in any schedule bank  .

2. What is lock in period in case of FDR?

Five years without any facility for premature encashment.So the money is certainly stuck for five years .

3. How much deduction can be claimed through bank's FDR?

The maximum deduction one can  avail is of Rs 1 Lakh. But that deduction is within overall limit of Rs 1 lakh for section 80C . What it means that if you have PF deduction of Rs 40000 in a year and you made a FDR of Rs 1 lakh , you can claim only Rs 1 lakh of deduction and not Rs 1.4 Lkah.

4. Can you get deduction u/s 80c for making FD in minor or in spouse name ?

The deduction u/s 80C is allowed only in name of person who actually invest in his own name not in any family members name. Therefore, if one wants to invest for spouse or minor , at best he can buy the FDR jointly and keeping his name as first holder.

5. Can you take loan against the FDR ?

These FDRs can not be pledged for the purpose any loan or advance. which means no loan can be taken against these FDR.

6. How will the interest on the FDR be taxed?

If you follow mercantile system ,the interest on FDR is taxable on accrual basis. If not, it will be taxed on receipt basis. Readers are advised to declare the income on accrual basis to spread the burden of income over period of five years.

7. Is better than PPF or NSC ?

The restriction that no loan can be availed from these FDR make it less attractive than NSC. Interest on PPF is tax free whereas FDR is taxable. At present , FDR is certainly not a better alternative than PPF or NSC.

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Can You Claim Deduction For Pilot Training Course?

My son is doing Commercial Pilot Training at New Zealand & I had availed Education Loan from Corporation Bank in August 2007. The loan is in the joint name of my son & my wife & myself is the guarantor. I have paid interest debted towards loan regularly. My question is whether the intetrest paid towards this loan is eligible for deduction under section 80E for filing my Income Tax Return .SURESH T, Mumbai

Your claim of deduction is not allowable on two grounds

1. the deduction is allowable to an assessee who has taken education loan. You have not taken the loan. Your son and wife have taken . There fore , you are not eligible for claiming deduction despite the fact that you have paid amount of interest. Read the provision  of section 80E carefully

80E. (1) In computing the total income of an assessee, being an individual, there shall be deducted, in accordance with and subject to the provisions of this section, any amount paid by him in the previous year, out of his income chargeable to tax, by way of interest on loan taken by him from any financial institution or any approved charitable institution for the purpose of pursuing his higher education or for the purpose of higher education of his relative"

2. Second reason is that the education loan has to be taken for the purpose of pursuing higher education which is defined subsection 3(c) in following words:

3(c) higher education means full-time studies for any graduate or post-graduate course in engineering, medicine, management or for post-graduate course in applied sciences or pure sciences including mathematics and statistics;

I find pilot training does not fall under any of the course given above. There fore , prima facie , you are not eligible for deduction of interest u/s 80E for aforesaid reasons.

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Can Employer Ask For Proof Before Allowing Deduction?

Can an employer give benefit of Sec. 80DD while issuing Form 16? If so, what documents should the employer obtain from the employee? Or should the employee claim this directly while filing his/her ROI?Is actual proof of expenditure required? Or deduction of 50k is granted irrespective?This is with respect to an employee who is claiming this for his sister. Narayan Ramakrishnan , Mumbai

Yes, an employer can give benefit of deduction u/s 80DD . In fact , the employer is supposed to give benefit of deduction claimed by an employee. This is clear from the Circular issued by the Central Board Of Direct Taxes every year for deduction of tax at source in case of salaries. For FY 2007-08 , CBDT issued circular no 8/2007    dated 5/12/2007 . As per this circular , the Drawing & Disbursing Officer should allow deduction claimed by the employee but they are also supposed to satisfy themselves about genuineness of the claim . The exact wording is as under

DDOs to satisfy themselves of the genuineness of claim

(21) The Drawing and Disbursing Officers should satisfy themselves about the actual deposits/subscriptions/payments made by the employees, by calling for such particulars/information as they deem necessary before allowing the aforesaid deductions. In case the DDO is not satisfied about the genuineness of the employees claim regarding any deposit/subscription/payment made by the employee, he should not allow the same, and the employee would be free to claim the deduction/rebate on such amount by filing his return of income and furnishing the necessary proof etc., therewith, to the satisfaction of the Assessing Officer.

Amount of deduction?

In my opinion, the deduction u/s 80DD up to Rs 50,000 is claimable if the assessee proves that he incurs  some kind of expenditure of the treatment and maintenance of relatives. For more on this , read here.

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What Are The Diseases Covered Under Section 80DDB?

As per Rule 11DD of the I T Act , following diseases or ailments are covered

(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.

Who are prescribed authorities to issue certificate ?

1. Neurological Diseases , a Neurologist having a Doctorate of Medicine (D.M.) degree in Neurology or any equivalent degree, which is recognised by the Medical Council of India.
2. Malignant Cancers- an Oncologist having a Doctorate of Medicine (D.M.) degree in Oncology or any equivalent degree which is recognised by the Medical Council of India.
3. Chronic Renal failure- a Nephrologist having a Doctorate of Medicine (D.M.) degree in Nephrology or a Urologist having a Master of Chirurgiae (M.Ch.) degree in Urology or any equivalent degree, which is recognised by the Medical Council of India;
4. Hematological disorders- a specialist having a Doctorate of Medicine (D.M.) degree in Hematology or any equivalent degree, which is recognised by the Medical Council of India :
5. For diseases for whoch no authority prescribed or prescribed authority is not vailable/posted - In that case ,certificate, with prior approval of the Head of that Government hospital in which the patient is receiving the treatment, , may be issued by any other specialist working full-time in that hospital and having a post-graduate degree in General or Internal Medicine, which is recognised by the Medical Council of India.

Form
The prescribed Form is 10-I which can be downloaded from here.

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Is Tuition Fee For Part Time Course Eligible For Deduction u/s80C?

I am working in industry since last two years. I recently joine