Medical reimbursement fully exempt from tax

SC Vasudeva

I am a Punjab government pensioner aged 74.  I was admitted to IVY hospital, Nawanshahr, on account of heart disease and stents were implanted on me. I incurred an expenditure of Rs 2,66,330 on my treatment. The government has sanctioned a reimbursement of Rs 1,60,144 only. Kindly advise whether the reimbursed amount is fully exempted or partially for income-tax purposes during FY 2019-20. —KK Soni

A. It is presumed that you are covered under the Punjab Government Employees and Pensioners Health Insurance Scheme. The scheme is compulsorily applicable to all serving Punjab Government employees and pensioners. The scheme covers the indoor/daycare entitlements. Under this scheme, all expenses incurred in course of medical treatment availed by the beneficiaries in the empanelled hospitals/nursing homes within the country, arising out of any illness/disease/injury and or sickness are covered. The expenses incurred for the treatment are reimbursed by the Punjab Government. Therefore, if IVY Hospital, Nawanshahr, is an empanelled hospital, the amount reimbursed by the Punjab Government would not be taxable.

a) What are deductions available under the Income Tax Act for disability due to any disease?

(b) Whether gesture amount (not gift) paid to service providers for rendering services to widow/widower/blind/disabled/helpless couples is entitled to rebate under the Income Tax Act?

c) Whether tax paid to Municipal Corporation is to be deducted from tax column or income from property?

(d) How much rebate is allowed on income from house property and under which section of the I-T Act? —C Lal

A. (a) A deduction is allowable to a person under Section 80U of the Income-tax Act 1961 (The Act) who is having a disability defined under the said section provided he complies with the provisions of the said section. Further, a deduction is allowed to an assessee in respect of the amount incurred on the medical treatment (including nursing), training and rehabilitation of a dependent being a person with a disability as defined under Section 80DD of the Act. A deduction is also allowable for the amount paid for medical treatment of specified disease or ailment subject to compliance of conditions specified in Section 80DDB of the Act. There is no other provision in the Act for providing any other deduction in respect of expenditure incurred by an assessee having a disability. Therefore, in case the amount received under 7th Pay Commission is of the nature referred to in the aforesaid sections is incurred by a person with a disability in the relevant financial year, a deduction would be allowed subject to the prescribed limits and compliance of the provisions contained in  the aforesaid sections.

(b) Deduction to the extent of 30% from annual letting value is allowable in the case of a house property under Section 24 of the Act in respect of a property given on rent. Such deduction would also be admissible where notional annual value is taxable under the provisions of the Act.

Q. We purchased a plot in a residential area in 1994 for Rs 4,000. After getting approval from the Municipal Corporation, a shop was built on this plot in 2007 and we spent Rs 4,00,000 on its construction.  We do not have bills of expenses incurred on the construction. 

If we sell the property for Rs 20 lakh now, how much income tax is to be paid keeping in view the shop is built in a residential area and bills of construction are not with us? Can we use bills prepared by an estimator for this construction, if need be? Also, if the buyer gives half amount in cash and half in DD for which registry will be done, can we deposit the cash in a bank? Can we invest the amount received in cash in tax-saving bonds?  —Gulshan Kumar

A. Your queries are replied hereunder:

(a) It would be advisable for you to obtain an approved valuer’s report for the value of land as well as cost of construction of the shop since the bills for such construction are not available with you. The value of land will have to be determined as on 1.4.2001 since the same was purchased in 1994. The amount of income-tax on long-term capital gain can be computed after taking into account the values so determined by an approved valuer. These figures not being available in the query, it would not be possible to compute the amount of long-term capital gain and tax thereon.  

(b) It is advisable to get sale deed executed at the full price rather than accepting any amount in cash. It may be added that in accordance with the provisions of Income-tax Act 1961 (The Act) the amount of capital gain is to be computed with reference to the value adopted for payment of stamp duty. Therefore, any cash transaction would not be of help to you.

I have been investing in shares for around 40 years. My queries are as under:

1. Some of these shares are currently in physical format. Out of these, I am unable to find rates of these shares in newspaper or online. Many of these were purchased through IPOs.

2. Few of these shares purchased long ago could not be transferred in my name, and I have kept them pending as these have no value as of today. With respect to new guidelines of income tax for ITR2, will these shares be counted as unlisted shares or not? —Amar Nath Bansal

A. It would not be advisable for you to assume that the shares purchased through IPO are not listed. You should, therefore, enquire from a share broker or the company to ascertain whether they are listed on any of the stock exchanges. You should not include such shares under the category of unlisted until and unless you are sure that these shares are not listed.