Family pension can be divided among legal heirs for taxation

SC Vasudeva

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Q. I am a Haryana Government pensioner aged 62. My wife expired in a road accident in 2006 while serving in the Education Department of Haryana. So I am getting family pension in addition to my regular pension. Please advise me on the following points:

(a) I have one unmarried daughter aged 24 who is still dependent on me. Can I divide my family pension of my late wife in two parts for getting income-tax rebate?

(b) My family got Rs 15 lakh as MACT claim which was divided equally among me, my daughter and my unmarried son. Can I as Karta of HUF claim rebate on interest of fixed deposit of the said amount of the MACT claim? — Subhash Sharma

A. Your queries are replied hereunder:

(a) It is possible to divide the family pension in the hands of the legal heirs of the assessee. According to the provisions of the Hindu Succession Act 1956, the husband and the children of the woman who had died shall be the legal heirs.  Accordingly, the family pension should be offered for taxation equally in the hands of all the legal heirs.

(b) It has not been clarified by you in the query whether there is HUF in existence and the status thereof stands accepted by the tax department. Presuming that HUF status does exist and further that the amount of compensation has been received for the benefit of the family, it may be possible to claim that interest earned on fixed deposit of such an amount belongs to HUF.  In such a case, it may be possible to claim a deduction under Section 80TTA of the Act.

Q. I am a Haryana Government employee and over Rs 5,000 is compulsorily deducted every month from my salary towards NPS. At present, I avail exemption of this amount under Section 80CCD and contribute extra Rs 50,000 to avail exemption under Section 80CCD (1B). I want to contribute more in other saving schemes rather than NPS.

Please let me know if I can avail exemption of Rs 50,000 under Section 80CCD(1B) from the amount compulsorily deducted from my salary, and the amount over Rs 50,000 of the said contribution, which is roughly about Rs 10,000, under Section 80CCD? — Kunal Wadhwa

A. A proviso to Section 80CCD(1B) of the Income-tax Act, 1961 (The Act)  states that no deduction under Section 80CCD(1B) of the Act shall be allowed in respect of the amount on which a deduction has been claimed and allowed under sub-section (1) of Section 80CCD of the Act. Therefore, an assessee can claim a deduction under Section 80CCD(1) of the Act to the extent of Rs 1,50,000 deposited under the said scheme and an additional deduction of Rs 50,000 in respect of the amount deposited under Section 80CCD(1B) of the Act. You can thus claim deduction under Section 80CCD of the Act on the above mentioned basis.

Q. Please let me know when an Indian becomes NRI while he is residing and working in Australia since April 2017?  — Asha Pasricha

A. An assessee who is working and residing in Australia since April 2017 shall be a non-resident Indian for assessment year 2018-19 i.e. financial year 2017-18 and any income received and earned in Australia for the said financial year will not be taxable in India.

(Readers can send their queries at delhi@scvindia.com)