File return to claim rebate under Section 80U

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I am a senior citizen and will be 82 years old during the financial year 2016-17, my DOB being 25.2.1935. I am a handicapped person with 54% disability.  When I was not 80 years old, I had been claiming Rs 50,000 rebate under Section 80U while submitting income tax return. After 80 years, my income did not exceed Rs 5 lakh, so I stopped submitting the return.  Now during the financial year, I think my income may exceed Rs 5 lakh. I want to know if I can club a rebate of Rs 75,000 (now it has been raised from Rs 50,000 to Rs 75,000) with Rs 5 lakh so that I may not have to submit return. — KK Sanon

You can definitely claim a deduction for Rs 75,000 under Section 80U of the Income-tax Act 1961 (The Act) provided a copy of certificate issued by the medical authority in the prescribed form is obtained and kept ready so that the same can be furnished as and when required by the Assessing Officer.  It may be added that in case you claim a deduction under the aforesaid section so as to reduce your income below Rs 5 lakh you will have to file your income-tax return in accordance with proviso to Section 139 of the Act.

Thanks for your advice regarding limit of Rs 1.50 lakh in PPF account. I shall feel obliged if you could let me know what action can be taken against a person who has opened an account in his own name as well as in the name of a minor and deposited Rs 1.50 lakh in each of these two accounts. — Dr Ashwani K Sharma

Public Provident Fund Scheme 1968 does not provide for any consequences with regard to the opening of two accounts – in assessee’s own name as well as in the name of a minor. The issue should, therefore, be discussed with the deposit office. 

Please provide the following information:

• I want to gift to my son Rs 1,60,000 (not in cash but through FD for five years (tax- saving). Am I entitled to deduction from my income? 
• I pay the LIC premiums of my son and daughter-in-law. Am I entitled to deduction from my income?
• Is rebate of Rs 2,000 under Section 87 admissible to all or only senior citizens?
• My son is planning to purchase a new car of medium segment up to Rs 5 lakh on loan by making the down payment. What will be his tax implications?
• My son has a proposed tax plan for 2016-17 as under. Please correct him where he is wrong.

Annual income from salary: Rs 9 lakh

HRA: Rs 60,000 per annum

Conveyance allowance: Rs 36,000 p.a

Net gross income: Rs 8,0,4000

Investments: PF: Rs 36,000 p.a

LIC: Rs 13,000 p.a

FD for five years: Rs 2,00,000

Total:  Rs 2,49,000

Net income: Rs 5,55,000 p.a

Exemption limit: Rs 2,50,000

Taxable income: Rs 3,05,000 p.a

Tax @ 10% — Rs 30,500 p.a

Is there any option to save this tax? Can provident fund be increased for saving more? — MM Puri

Your queries are replied hereunder:-

• A gift made by you to your son would not be deductible from your total income.
• Life insurance premium paid on the life of your son would be deductible from the total income under Section 80C of the Act.  However, life insurance premium paid in respect of your daughter-in-law’s policy shall not be deductible from your total income.
• An assessee, being an individual resident in India, whose total income does not exceed Rs 5 lakh is entitled to a deduction from the amount of income-tax chargeable on the total income for any assessment year of an amount equal to 100% of such income-tax or an amount of Rs 2,000, whichever is less. The rebate admissible is, therefore, limited to Rs 2,000 only.
• The transaction referred to in the query will not have any income-tax implications.
• The computation of total income as made by your son has following deficiencies:
• Deduction for house rent is admissible to the extent of limit prescribed under Rule 2A of the Income-tax Rules 1962 (The Rules).  According to the said Rule, least of the following amounts are allowable as deduction:

Actual amount of house rent allowance received by the assessee; or

The amount by which the expenditure actually incurred by the assessee on payment of rent in respect of residential accommodation occupied by him exceeds 1/10th of the amount of salary due to him; or

An amount equal to one-half of the amount of salary due to him in case accommodation is situated at Mumbai, Kolkata, Delhi and Chennai and where such accommodation is situated at any other place 2/5th of the amount of salary received by him.

• Maximum deduction permissible under Section 80C of the Act is Rs 1,50,000.  Therefore, deduction of Rs 2,49,000 claimed by him should be restricted to Rs 1,50,000.
• Conveyance allowance is exempt to the extent of Rs 1,600 per month. Deduction should be limited to Rs 19,200 as against the deduction of Rs 36,000 claimed by him.
• He can save tax by making payment towards a health insurance policy by cheque.  The maximum amount deductible under Section 80D of the Act is Rs 25,000.  He can also get deduction to the extent of Rs 25,000 in case he pays premium by cheque in respect of insurance policy on the health of parent/parents. 

As pointed out above, the maximum deduction permissible under Section 80C of the Act is Rs 1,50,000. Therefore, any increase in the amount of deposit of Provident Fund would not enable him to claim any further deduction.

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