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Premium paid for health insurance of in-laws is not deductible under section 80D

LiveMint logoLiveMint 27-03-2017 Parizad Sirwalla

Is the tax benefit of paying premium of a health plan available for my in-laws?

—Rohit Jain

The deduction towards the health premium payment can be availed only if it is paid against a health policy taken for self, spouse, dependent children and parents (section 80D). The benefit is not available for health premium payment for in-laws.

I am unmarried and live with my parents (senior citizens). My father’s salary was about Rs15 lakh and my annual salary was about Rs7 lakh during the FY 2016-17. Our employers have deducted the required taxes on our salary income. Is it still compulsory to file a tax return? Can we file tax return jointly as a family instead of doing so individually?

—Naresh Malviya

For an individual, whose total income during the relevant financial year (FY) exceeds a specified income threshold or who holds specified overseas assets, filing personal tax return within the specified due date is mandatory (Section 139 of the Income-tax Act).

Further, for a resident senior citizen (age 60 years and above but below 80 years) and any other individual (aged less than 60 years), the aforesaid income threshold for FY 2016-17 is Rs3 lakh and Rs2.5 lakh respectively.

There is no provision for joint/family tax filing. Each individual has to file his personal tax return separately.

An exemption was available to a salaried individual from filing of return if the total income is up to Rs5 lakh, subject to specified conditions for FY2010-11 and FY2011-12. The same will not be applicable for FY 2016-17.

Accordingly, you and your father would be required to file tax returns separately by the due date (i.e., 31 July 2017) even if taxes are deducted by your respective employers to disclose salary and other income, such as capital gains.

I will be joining my first job as an assistant engineer in a factory near Mumbai from 1 April 2017 and my salary will be about Rs50,000 per month. My salary includes house rent allowance (HRA) of Rs10,000 per month. The balance Rs40,000 per month is my basic salary. Kindly let me know the amount of exemption I can claim if I pay Rs10,000 per month as rent to my landlord.

—Shashank Nair

An employee staying in a rented apartment and receiving the House Rent Allowance (HRA) from his employer can avail an exemption under section 10(13A), read with rule 2A of the Income-tax Act. The exemption can be claimed only if an employee stays in a rented house, which is not owned by him and actually pays rent for such a house.

The quantum of HRA exemption shall be restricted to the minimum of the following:

•Actual HRA received for the period the house was occupied, or

•Actual rent paid in excess of 10% of specified salary for the relevant period, or

•50% of salary if you live in a metro city (i.e., Delhi, Mumbai, Chennai and Kolkata), or 40% of your salary if you live in a non-metro city.

Salary for above purpose means basic salary, which includes dearness allowance, if the terms of employment so provide, but excludes all other allowances.

Assuming you do not own the house and would be staying in a rented apartment from 1 April 2017 to 31 March 2018 in Mumbai, the HRA exemption would be Rs72,000 for FY2017-18, this being the minimum of the following:

•Actual HRA received (i.e. Rs10,000 for 12 months) - Rs1.20 lakh or

•Actual rent paid (Rs1.2 lakh) in excess of 10% of salary (i.e. 10%* 4.80 lakh), i.e., Rs72,000 or

•50% of salary (i.e. 50%* 4.8 lakh), i.e., Rs2.4 lakh

The aforesaid HRA exemption would be subject to producing specified documents to the employer such as duly executed lease agreement, rent receipts, Permanent Account Number (PAN) of the landlord (reporting of PAN to employer is mandatory where rent payment exceeds Rs1 lakh per annum). In case the landlord does not have PAN, a declaration to this effect from the landlord along with the name and address of the landlord is required.

Parizad Sirwalla is partner (tax), KPMG

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