TAX TALK-26.06.2017-THE HITAVADA
TAX TALK
CA. NARESH JAKHOTIA
Chartered Accountant
Any taxpayer selling the old properties acquired/constructed on or before 01.04.2001 can replace the actual cost of acquisition / improvement with the fair market value as on 01.04.2001.
Cost Inflation Index for the FY 2017-18 notified as “272”
Query 1]
I & my wife are both senior citizens and I want to take medical insurance for both of us and I will be paying the premium. What is the maximum benefit I can get under section 80D in addition to the maxim limit of Rs. 1.50 Lakh under section 80C? Kindly elucidate. [n_premkumar@hotmail.com]
Opinion:
Rising medical expenditure could wipe out the old saving in case the person is not covered by medical insurance. As such, it is a must for everyone to opt for mediclaim policy. Further, section 80D offers tax benefit in respect of health insurance premium (mediclaim policy) payment. This benefit is in addition to deduction u/s 80C (towards LIC/PPF/ELSS etc up to Rs. 1.50 Lakh) & deduction u/s 80CCD (1B) (towards National pension scheme up to Rs. 50,000/-). Deduction u/s 80D is available to individual towards the premium paid for the health insurance of his own health or on the health of spouse, dependent parents and children or to HUF towards the premium paid for the health of any members of the family.
Amount of Deduction:
- For Individual:
Maximum deduction of Rs. 25,000/- is admissible for medical premium paid in respect of policy taken for self, spouse or dependent children. In case, any of the person specified above is a senior citizen (i.e., 60 years or more) & medical insurance premium is paid for such senior citizen, deduction is enhanced to Rs. 30,000/-. Deduction up to Rs. 25,000/- is available for mediclaim premium paid for parents. In case any of the parents covered by mediclaim policy is a senior citizen, deduction amount is enhanced to Rs. 30,000/-. Preventive health check up offers a deduction up to Rs. 5,000/- subject to overall limit of Rs. 25,000/- or Rs. 30,000/- as mentioned above.
- For HUF:
Mediclaim premium paid towards policy of any member of the HUF is admissible as deduction up to a maximum of Rs. 25,000/-/ In case any of the member of ht HUF covered by mediclaim policy is a senior citizen, deduction could be claimed up to Rs. 30,000/-.
However, readers may note that deduction u/s 80D is available only if the premium is paid out of income chargeable to tax & is paid by any mode other than in cash except payment towards preventive health check up (which is eligible for deduction up to Rs. 5,000/-). To be precise, no deduction is admissible if the premium payment is done in cash whereas payment towards preventive health check up is allowed to be done in cash. Deduction u/s 80D is available to resident as well as non-resident. Even medical expenditure incurred on the health of a person who is a very senior citizen (80 years & above) for whom mediclaim policy is not taken (or cannot be taken due to age) is also allowed as deduction u/s 80D subject to same overall ceiling.
Query 2]
Kindly clarify whether 2.75 percent interest on sovereign gold bond scheme is tax free or taxable? [Sundar Krishnaswamy- kalyanisundar33@gmail.com]
Opinion:
Interest receivable from Sovereign gold bond scheme is fully taxable.
Query 3]
Whether the cost inflation index for the current financial year 2017-18 is announced by the Government? Whether the bond to save capital gain tax can be invested after a period of 2 years if the house property purchase deal is not finalized for any reason whatsoever? Whether the interest receivable from such bond is tax free or it will be subject to tax? Please guide. [A.J.Patel, Manish Nagar, Nagpur]
Opinion:
- Any taxpayer selling the old properties acquired/constructed on or before 01.04.2001 can replace the actual cost of acquisition / improvement with the fair market value as on 01.04.2001. (Prior to the Finance Act-2017, the provision was applicable in respect of properties acquired on or before 01.04.1981 wherein the fair market value as on 01.04.1981 was allowed to be adopted by the taxpayer. In short, the base year for computation of capital gain is shifted from 1981 to 2001 by virtue of the recent amendment. As a result of this, capital gain could drastically result in lower taxable long term capital gain in the hands of taxpayer & would result in lower tax liability. Amendment has resulted in change in the provisions relating to indexation for the purpose of computing Long Term Capital Gain (LTCG). Old Cost Inflation Index (CII) has now become redundant & CBDT has notified the new CII with base year as 1-4-2001 [vide notification No. SO 1790(E) (No. 44/2017) (F. No. 370142/11/2017-TPL)], Dated 5-6-2017] as under:
| S.No. |
Financial Year |
Cost Inflation Index |
| 1 |
2001-02 |
100 |
| 2 |
2002-03 |
105 |
| 3 |
2003-04 |
109 |
| 4 |
2004-05 |
113 |
| 5 |
2005-06 |
117 |
| 6 |
2006-07 |
122 |
| 7 |
2007-08 |
129 |
| 8 |
2008-09 |
137 |
| 9 |
2009-10 |
148 |
| 10 |
2010-11 |
167 |
| 11 |
2011-12 |
184 |
| 12 |
2012-13 |
200 |
| 13 |
2013-14 |
220 |
| 14 |
2014-15 |
240 |
| 15 |
2015-16 |
254 |
| 16 |
2016-17 |
264 |
| 17 |
2017-18 |
272 |
- Interest received from specified capital gain bonds issued by Rural Electrification Corporation (REC) or National Highway Authority of India (NHAI) is taxable.
- For saving LTCG tax u/s 54EC, investment in bonds has to be done within a period of 6 months only. Option to invest in specified bonds after the expiry of a period of 2 years (for purchase of house property) is not available with the taxpayer.
[The author is a practicing Chartered Accountant from Nagpur. Readers may send their direct tax related queries at
SSRPN & Co
10, Laxmi Vyankatesh Apartment
C.A. Road, Telephone Exch. Square
Nagpur-440008
or email it at nareshjakhotia@ssrpn.com]
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