INCOME TAX

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INCOME TAX EXEMPTIONS:

80DDB- Deduction In Respect Of Medical Treatment, Etc.:

New Delhi, 17^th October, 2003.

S.O. 1210(E)- In exercise of powers conferred by section 295, read with section 80DDB of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely :-

1. (1) These rules may be called the Income-tax (25^th Amendment) Rules, 2003.

    (2) They shall be deemed to have come into force on the 1^st day of April, 2003.

Where an assessee who is resident in India has, during the previous year, actually incurred any expenditure for the medical treatment of such disease or ailment as may be specified in the rules made in this behalf by the Board--

(a) for himself or a dependant relative, in case the assessee is an individual; or

(b) for any member of a Hindu undivided family, in case the assessee is a Hindu undivided family,

the assessee shall be allowed a deduction of a sum of Forty Thousand rupees in respect of that previous year in which such expenditure was incurred:

Provided that no such deduction shall be allowed unless the assessee furnishes a certificate in such form and from such authority as may be prescribed.

Provided further that the deduction under this section shall be reduced by the amount received, if any, under insurance from an insurer for the medical treatment of the person referred to in clause (a) or clause (b):

Provided also that where the expenditure incurred is in respect of the assessee or his dependant relative or any member of a Hindu undivided family of the assessee and who is a senior citizen, the provisions of this section shall have effect as if for the words "forty thousand rupees", the words "sixty thousand rupees" had been substituted.

Explanation: ---For the purposes of this section, ---

(i) "dependant" means a person who is not dependent for his support or maintenance on any person other than the assesses;

(ii) "insurer" shall have the meaning assigned to it in clause (9) of section 2 of the Insurance Act, 1938(4 of 1938);

(iii) "senior citizen" means an individual resident in India who is of the age of sixty-five years or more at any time during the relevant previous year.

Not all diseases are covered – the diseases mentioned in rule 11DD of the Income Tax (IT) Act are covered under this section. These diseases are:

Neurological Diseases (where the disability level has been certified as 40% or more)

- Dementia - Dystonia Musculorum Deformans- Motor Neuron Disease- Ataxia- Chorea- Hemiballismus

- Aphasia- Parkinsons Disease -Malignant Cancers-Full Blown Acquired Immuno Deficiency Syndrome (AIDS)-Chronic Renal failure-Hematological disorders- Hemophilia- Thalassaemia

How much is deductible?

Any amount paid for the medical treatment is deductible from your income, subject to a cap of Rs. 40,000.

If the amount is spent for a senior citizen (age 65 years or more), the upper limit is higher - Rs. 60,000.

However, if you get the amount reimbursed by your employer or you get the amount from an insurer, you would not be able to claim deduction under section 80DDB.

You can of course claim deduction for the amount spent by you on your treatment.

Apart from that, you can also claim deduction for money spent by you on medical treatment of some of your dependent relatives. These are:

Please note that for you to claim deduction u/s 80DDB, these people should be wholly or mainly dependent on you for their support and maintenance.

SECTION 10 (14) (c) of the Income Tax Act:

(14)(i) Any such special allowance or benefit, not being in the nature of a perquisite within the meaning of clause (2) of section 17, specifically granted to meet expenses wholly, necessarily and exclusively incurred in the performance of the duties of an office or employment of profit, as may be prescribed, to the extent to which such expenses are actually incurred for that purpose;

(ii) Any such allowance granted to the assessee either to meet his personal expenses at the place where the duties of his office or employment of profit are ordinarily performed by him or at the place where he ordinarily resides, or to compensate him for the increased cost of living, as may be prescribed and tor the extent as may be prescribed.

Provided that nothing in sub-clause (ii) shall apply to any allowance in the nature of personal allowance granted to the assessee to remunerate or compensate him for performing duties of a special nature relating to his office or employment unless such allowance is related to the place of his posting or residence; 

Clause (C) of subsection (14) of Section (10) specially saying that “Any allowance granted to meet the expenditure incurred on conveyance in performance of duties of an office/employment of profit. Provided free conveyance is not provided by the employer.”

Certain allowances given by the employer to the employee are exempted u/s 10(14) w.e.f. 01-07-1995, all these exempt allowance are detailed in Rule 2BB of Income Tax Rules and are briefly given below :

(i) Allowance granted to meet cost of travel on tour or transfer.

(ii) Allowance granted to tour or journey in connection with transfer to meet the daily charges incurred by the employee.

(iii) Allowance granted to meet conveyance expense incurred in performance of duty, provided no free conveyance is provided.

(iv) Allowance granted to meet expenses incurred on a helper engaged for performance of official duty.

(v) Academic, research or training allowance granted in educational or research institutions.

(vi) Uniform purchase or maintenance allowance.

(vii) Other allowances as prescribed in Rule 2BB(2) for the purpose of Section 10(14)(ii).

Section 80E

DEDUCTION IN RESPECT OF REPAYMENT OF LOAN TAKEN FOR HIGHER EDUCATION:

(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 repayment of loan, taken by him from any financial institution or any approved charitable institution for the purpose of pursuing his higher education, or interest on such loan :

Provided that the amount which may be so deducted shall not exceed twenty-five thousand rupees.

(2) The deduction specified in sub-section (1) shall be allowed in computing the total income in respect of the initial assessment year and seven assessment years immediately succeeding the initial assessment year or until loan referred to in sub-section (1) together with interest thereon is paid by the assessee in full, whichever is earlier.

(3) For the purposes of this section, -  (a) "Approved charitable institution" means an institution specified in, or, as the case may be, an institution established for charitable purposes and notified by the Central Government under clause (23C) of section 10 or an institution referred to in clause (a) of sub-section (2) of section 80G;

(b) "Financial institution" means a banking company to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act); or any other financial institution which the Central Government may, by notification in the Official Gazette, specify in this behalf;

(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 1002f ;

(d) "Initial assessment year" means the assessment year relevant to the previous year, in which the assessee starts repaying the loan or interest thereon.

27. In section 80E of the Income-tax Act, with effect from the 1st day of April 2008,—

          r (i)  in sub-section (1), after the words “higher education”, the words “or for the purpose of higher education of his relative” shall be inserted;

          (ii)  in sub-section (3),—

     (A)  in clause (a), for the words “notified by the Central Government”, the words “approved by the prescribed authority” shall be substituted;

     (B)  after clause (d), the following clause shall be inserted, namely:—

         ‘(e)  “relative”, in relation to an individual, means the spouse  and children of that individual.’.

Section 80C: Investment in specified instruments and expenses

Section 80C gives every income tax payer up to a maximum of Rs. 1,00,000 tax freer income in a year if they invest in or buy the following instruments. Please not that this is a combined total of Rs. 1,00,000 and not an individual figure for every instrument:

 2. Provident Fund (PF) contribution

3. Public Provident Fund (PPF) - only up to Rs. 70,000 in a year

5. Equity Linked Savings Schemes (ELSS) of Mutual Fund Companies

You can take advantage of an annual deduction of Rs. 15,000 from taxable income for payment of Health Insurance premium for self and dependants. For senior citizens, this deduction is Rs. 20,000.

Section 80E: Interest paid on educational loans

You can claim a deduction on the interest paid on loans taken for higher education for yourself, your spouse and children. There is no limit on the amount of deduction you can claim.

The only thing to keep in mind is that the program for which the loan is taken should be a graduate or post-graduate program in engineering, medicine or management or a post-graduate course in the pure or applied sciences.

Section 80G:r Donations to Charitable institutions

You can claim a deduction for any donation that you might have made to a charitable fund or institution. However, please note that these donations should be made only to specified institutions. And a proper proof of payment must be provided for the same. Based on the classification of the charity , you can claim either 100% or 50% of the donated amount as deduction. The deduction might also be subject to a certain limit again based on the type of charity that you are donating money

Section 24: Interest paid on housing loan

Under Section 24, a maximum of Rs 1,50,000 can be deducted from your taxable incomer as interest repayment for a self occupied house. Please note that this deduction is not available if you the house is still under construction and You do not have occupation of the house.

Provisions that you should take advantage of if you are a salaried employee:

Section 10(13A) : House Rent Allowance

You can take advantage of the provisions under this section if you are renting an accommodation. These provisions will not be available to you if you stay in a rent-free accommodation or live with your family or in your own house.

Under Section 10(13A), HRA is exempt to the least of the following: i) 50/40 per cent of basic salary= Dearness Allowance (if, applicable), ii) excess of rent paid over 10 per cent of basic salary; and iii) actual HRA received.

Let’s illustrate this calculation with an example:

The HRA exemption would be the least of the following:

2. 50% of salary (basic component + dearness allowance) = 50% x (30,000 + 0) = Rs.15,000

3. Actual rent paid - 10% of salary (basic component + dearness allowance) = Rs. 14,000 - [10% of (30,000 + 0)] = 14,000 – 3,000 = Rs 11,000

Rs. 11,000 being the least of the three amounts will be the exemption from HRA.

The balance HRA of Rs 4,000 (15,000-11,000) would be taxable.

Please note that HRA exemptions are only available on submission of rent receipts or the rent agreement.

If you want to pay rent to your parents or any relatives (like uncle/cousin) whom you are staying with. You will need to treat them as landlords. And request the owner of the house (which will be one of your parents) to declare it in his/r her personal income tax return. This will prevent any litigation in the future.

Section 10 (14) Ruler 2BB(10) : Transport Allowance

Transport allowance granted for commuting between your residence and place of work is exempt up to Rs. 800 a month. You can take advantage of this provision to get a tax exemption of Rs 9600 annually by providing your employer with bills or a self declaration.

Section 17(2) :r Medical Reimbursement

You can claim exemption up to Rs 15,000 annually on actual expenditure incurred on your medical treatment or for treatment of any of your dependents. Moreover there is no restriction of approved hospitals or clinic for the same. This is exempt only on provision of actual bills.

IT Relief under Section 89(1) for Second Instalment (60%) of 6th CPC arrears received during the year 2009-10. CALCULATION

Name:            , Designation:          , Station:  ,                         Staff No:                   , PF No:                         .

Financial Year 2005-06(Assessment Year -2006-07)

Financial Year 2006-07(Assessment Year -2007-08)

Financial Year 2007-08(Assessment Year -2008-09)

Financial Year 2008-09(Assessment Year -2009-10)

Financial Year 2009-10(Assessment Year -2010-11)

DISTRIBUTION OF ARREARS TO PREVIOUS YEARS

About the Author

 R.BALASUBRAMANIAN,

SM/VM/TPJ DIVISION/S.Rly

Central Office Secretary.

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