Accidental death claim is tax free

SC Vasudeva

My wife died in a road accident after being hit by a car. She was a government teacher and was 26-year-old at the time of the accident. I, being the only legal heir, filed a case under MACT of Rs 65 lakh against the insurance company and the driver. My query is what will be the tax liability on my part when I receive the claim amount. Does the insurance company deduct any TDS on the claim? If yes, do I have to deposit the remaining tax, if applicable?    — Mohit Singla

The claim amount received by you would not be taxable as the same is not in the nature of an income and therefore the issue with regard to deduction of tax at source would not arise.

I have gifted some shares to my wife. I have executed a gift deed in respect of such gift. My queries are as under:
(i) Is there any tax leviable on such a gift?
(ii)  As and when the above shares are sold, who will be liable to pay the capital gains tax if the shares are sold at a profit?     — Ravi Kumar

The gift of shares to your wife is not taxable under the provisions of the Income-tax Act 1961 (The Act). However, in accordance with the provisions of the Act, transfer of a capital asset without any consideration to a wife will be ignored and the capital gain arising on the sale of shares computed according to the provisions of the Act shall be chargeable to tax in your hands.  
 

Can a husband give gift to his wife and vice-versa? Can one get benefit of tax rebate on contribution made to an LIC or pension fund, when the beneficiary is minor/major daughter’s daughter or daughter’s son and or a married daughter or a son etc?  Bank deposits exceeding a period of five years or more are exempted or interest earned by such instruments within the ceiling of Rs 1 lakh.

Does it also include Post Office MIS accounts where the term is six years?  —Vijay Kumar

Your queries are replied hereunder:
(i) A husband can gift any amount to his wife without any tax liability thereon. However, the income earned on the gifted amount would be clubbed with the income of the husband. A gift by wife to a husband is also exempt from tax but the income earned on the gifted amount would be clubbed with the income of the wife. 

(ii) Section 80C of the Act covers the deduction for any amount paid by an individual to effect or to keep in force an insurance on his/her life, his/her spouse and any child of such individual. Such deduction is subject to a maximum amount of Rs 1,50,000 as per the provisions of the said section. The child may be major or minor. Therefore, a married daughter would also be covered in the aforesaid category. However, the daughter’s daughter or daughter’s son would not be covered for the purposes of claiming aforesaid deduction under Section 80C of the Act.

(iii)The deduction in respect of contribution to pension scheme of Central Government is allowed to an individual who has paid or deposited any amount in his account under the pension scheme notified by the Central Government. The account has to be in the name of the contributor only.

(iv) A deduction under Section 80C of the Act is allowable in respect of long-term deposit for a fixed period of not less than five years with a scheduled bank in accordance with the Central Government Scheme notified in this regard. The interest on such deposits is not covered within the provisions of the aforesaid section and is therefore taxable.

(v) The amount paid towards five-year deposits under the Post Office Time Deposit Rules 1981 is covered for the purpose of deduction under the aforesaid section.