Mukesh Patel.in
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TWO DEDUCTIONS ON A DEBUT!

Don’t miss tax breaks for SB interest earned upto Rs.10,000 and preventive health check up expenditure of Rs.5,000!

While you are all set to file your income-tax returns for Assessment Year 2013-14, here is a gentle reminder to ensure that you do not miss to claim two new deductions under the Section 80 family, which are making their first appearance this year.

Under section 139(1C), the Central Government has been authorized to exempt any class or any classes of persons from the requirement of furnishing a return of income, subject to such conditions as may be prescribed, through the issue of a notification in the official gazette.

Accordingly, for the Assessment Years 2011-12 and 2012-13, salaried employees, whose total income did not exceed Rs.5 lakhs and whose income consisted only of salaries and income from other sources, by way of interest from a savings account in a bank, not exceeding Rs.10,000, were granted exemption from filing of their income-tax returns. This was subject to the condition that the taxpayer had discharged his total tax liability in respect of both salary and interest income through tax deduction at source by his employer and no claim of refund of any tax was due to him.

SB A/C INTEREST UPTO RS.10,000 EXEMPTED

The above scheme of exempting salaried employees with total income less than Rs.5 lakhs from filing their income-tax returns never really took off, since it was very difficult to come across cases where the taxpayer would have been in a position to discharge his tax liability on the interest received on his savings account in a bank.

 With a view to overcome this practical problem and also grant general relief to all taxpayers, the Finance Act, 2012 introduced Section 80TTA, granting a deduction of Rs.10,000 in aggregate to an individual or HUF, in respect of any income by way of interest on deposits in a savings account with a bank, a co-operative society or a post office.

 It is pertinent to note that this deduction shall not be available in respect of interest earned on time deposits i.e. deposits fixed for tenure. It has been further clarified that, if such a deposit is held in a savings account on behalf of a firm, AOP or BOI, no deduction shall be available in respect of such interest in computing the total income of the partner of the firm or any member of any AOP or BOI.

RS.5,000 FOR PREVENTIVE HEALTH CHECK-UP

Under the Finance Act 2012, the scope of Section 80D was also widened to include payments not exceeding Rs.5,000, made on account of preventive health check-up for the taxpayer, his spouse and  dependent children. It needs to be noted that this deduction is available within the existing overall deduction limits of Rs.15,000 or Rs.20,000 (in case of senior citizens) prescribed under Section 80D.

Moreover, any payment not exceeding Rs.5,000, made on account of preventive health check up of parents of the taxpayer, is also be eligible for deduction under Section 80D within the prescribed limit of Rs.15,000 or Rs.20,000 (in case of senior citizen parents).

It needs to be noted that unlike payment of medical insurance premium, such payments towards preventive health check-up made in cash shall also be eligible for deduction under Section 80D.

Case Study-1: Mr. X pays Rs.9,000 as medical insurance premium for self, wife and dependent children. Moreover, during FY 2013-14, he incurs expenditure of Rs.7,000 for their preventive health check-up. In this case, Mr. X will be entitled to claim Rs.5,000 (being the maximum prescribed) for preventive health check-up and Rs.9,000 for medical insurance premium, totaling to Rs.14,000, which is within the eligible deduction limit of Rs.15,000 under Section 80D.

Case Study-2: If in the Case Study-1 above, Mr. X has paid medical premium of Rs.12,000 and incurred health check-up expenditure of Rs.5,000, he will be entitled to the maximum eligible deduction of Rs.15,000 under Section 80D, against the eligible payments of Rs.17,000 made by him. However, when he or his wife become senior citizens, Mr. X can claim the entire Rs.17,000 (Rs.12,000 + Rs.5,000) as a deduction since the eligible limit in such a case would be Rs.20,000.

Case Study-3: Mr. M, aged 50 years, has made the following payments during FY 2013-14:

  • Rs.8,000 for medical insurance premium of self, wife and dependent children.

  • Rs.6,000 for preventive health check-up of self, wife and dependent children.

  • Rs.17,000 for medical insurance premium of his senior citizen parents.

  • Rs.4,000 for preventive health check-up of his senior citizen parents.

In this case, Mr. M will be eligible for deduction under Section 80D as under:

  • In respect of the payments made for self, wife and dependent children, he shall be entitled to claim deduction of Rs.13,000, representing the eligible payments of Rs.8,000 for medical insurance and Rs.5,000 (maximum available) for health check-up.

  • In respect of the payments made for senior citizen parents, he shall be entitled to claim the maximum deduction available of Rs.20,000, against the eligible payments of Rs.21,000 made by him.

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