I am a salaried employee and meet all the medical expenses of my mother who is a patient of intestinal cancer. Can I claim deduction under Section 80DDB?
—Rahul Sinha
Yes, you can claim deduction under Section 80DDB for the medical expenses of your dependent mother. But you can claim deduction under this section only if you have not claimed any medical reimbursement from your employer or from an insurance company for the same treatment. The maximum deduction allowed from gross total income is Rs 40,000. In case your mother is a senior citizen i.e. above 65 years of age, the maximum deduction is Rs 60,000. To claim this deduction you will have to submit Form No. 10-I filled by a specialist doctor working in a government hospital in India confirming the treatment of disease and also that the disease is eligible for deduction as per the list given. Form No. 10-I does not require the doctor to certify the amount incurred. For that you will have to produce hospital bills separately.
Does profit from investing in futures and options come under capital gains or income from business and profession?
—Pavani
The profit from futures and options is treated as short-term capital gains and attracts a flat 10% tax. (From next year, this tax will be 15%). However, if such income forms a major part of the taxpayer’s annual earnings, the Income Tax Department can consider it as business income.
I gifted Rs 2 lakh to my married daughter. Is this amount taxable in her hands? What are the tax implications of the gift?
—VK Thakur
The gift amount of Rs 2 lakh will not be taxed in the hands of your daughter as gift received from certain specified relatives (father in her case) is exempt from tax. The specified relatives include father, mother, spouse, children, brother, sister and other close relatives. There is no upper limit for the amount of gift that can be received from close relatives. In case a person receives a gift of more than Rs 50,000 from someone not covered under the definition of specified relatives, it will be taxable in the hands of recipient as income. Though there is no specific requirement to mention the gift in your income tax return, it is advisable to do so by adding a short note in the tax computation sheet. Also, draw up a gift deed on a stamp paper and keep it in your records.
I pay Rs 40,000 as tuition fees for the full-time education of my sister.Will this payment qualify for deduction under Section 80C?
—Pankaj Mishra
No. Under Section 80 C, tuition fees (excluding development fees, donations or payments of similar nature) paid for full-time education of any two children of an individual qualify for deduction. This payment of tuition fee should be made to a recognised university, college, school or any other educational institution within India. Since the deduction is available for fees paid for children only, you cannot claim it for the education expenses of your sister.
I plan to sell a house inherited from my father.This house was bought by my father 20 years ago for a very small price.Am I be liable to pay capital gains tax on the sale of inherited property?
—Rajesh Kumar
Yes, you are liable to pay capital gains tax. Ancestral property is taxed only at the time of its sale. As the property has been held for more than 20 years, the profit on sale will be long-term capital gains that is taxed at the rate of 20% after indexation of cost as per the rates applicable in the year of purchase and sale. Indexation adjusts the cost of acquisition by adjusting it for inflation during the period for which the asset was held. To explain this, let us assume that your father bought the property for Rs 50,000 in 1980 and you sold it for Rs 50 lakh in 2007. The indexed cost of the property works out to be Rs 50,000 x 551/100 = Rs 2,75,500. The longterm gain will be Rs 47,24,500 (Rs 50 lakh less Rs 2,75,500). There will be a 20% tax on this, which works out to Rs 9,44,900.
If you invest the capital gains to purchase a new house within one year before or two years after the transfer of the property sold by you, the amount will be exempt from tax. The tax exemption is also available if you use the money to construct a new residential property within three years from the date of the sale.
I get leave travel concession from my employer. I did not travel in the year. Can I claim the exemption for travel expenses of my parents if I furnish the proof?
—Samir Ambavi
According to Section 10(5) of the Income Tax Act, an employee is entitled to leave travel concession from his employer for himself and his family for travelling to any place within India. The provision has two basic conditions. First, the employee must take leave and second the employee should accompany dependent family members for the travel. Neither did you take leave nor did you travel with your parents. Hence you are not eligible for leave travel concession from your employer.
I left for the UAE to take up a job on 18 August 2006. During the financial year 2006-7, I visited India after my departure for 21 days. I left my job in the UAE on 31 October 2007, to take up a new job in India. During the financial year 2007-8, I was in India before leaving UAE for 10 days.Will the salary I received in UAE be taxable in India for these two financial years?
—Ashok Agarwal
Your stay in India has been less than 182 days in the two financial years. Thus your status according to the Income Tax Act, shall be that of a non-resident. Moreover, salary received abroad from a business controlled outside India is not taxable in India. Hence the salary of your UAE job will not be taxed in India. For you, only income which is received or is deemed to be received in India or income which accrues or arises or is deemed to accrue or arise in India shall be taxable in India.
I sold a property within one year of acquiring it. The sale price was Rs 17 lakh and capital gains approximately Rs 7 lakh. I invested Rs 15 lakh in a house within two weeks of the sale. Am I entitled to any capital gains exemption?
—Vijay Kulkarni
For claiming exemption of capital gains tax under Section 54, the property must be held for at least three years before it is sold. You are not entitled to exemption for your reinvestment as the first property was sold within one year of acquiring it. So the profit on sale is a short-term gain and it will be taxed in your hands at normal tax rates.
