The Hindu Business Line : Benefits of spending

The annual life insurance premium paid by you would be Rs 1,40,000. This would qualify for deduction under Section 80C in computing your total income subject to a maximum of Rs 1 lakh. Since this limit stands exhausted, the principal repayment if any on the housing loan will not qualify for any tax deduction.

The interest on the housing loan will also not qualify for deduction in the current year.

It can qualify for deduction only from the assessment year 2007-08 and the interest up to the financial year ending March 31, 2006 can be claimed in five equal annual instalments beginning from the assessment year 2007-08. Of course the interest of the previous year 2006-07 can be claimed in the assessment year 2007-08.

A house property was acquired by X and transferred to his younger brother Y in 1984.

In the event of Y's death in 1993, their sister Z inherited the property.

When Z passed away her son, A, inherited the property.

A has now sold the property.

What would be the cost of acquisition and the nature of capital gains? Please note that the original documents of purchase, in 1984, are not available.

Is there any way to claim exemption in respect of the capital gains? Vishwajeet Desai

You have not indicated how the property stood transferred from X to his brother Y.

If it were by means of a normal sale, the cost of acquisition of Y would be treated as the cost of acquisition of A, who ultimately sold the property.

If Y had acquired it by way of gift or inheritance, then the cost of acquisition of X would be treated as the cost of acquisition of A, who ultimately sold the property.

The capital gain in either case would be long term since A has held it along with the previous owners from whom it was acquired by way of inheritance for more than 36 months.

This would mean that the cost of acquisition can be indexed in computing the capital gains.

The indexation benefit can be claimed from the financial year in which Y held the asset if it was purchased by Y from X or from the financial year in which it was held by X if it was acquired by way of inheritance etc from X by Y.

If the original title documents are missing it should have been possible to acquire copies of the same from the office of the Sub-registrar failing which it would not have been possible to sell the property.

The exemption for capital gains will depend on the nature of property.

You have not indicated whether the property is a land or a residential house etc.

Depending on the nature of property exemption can be claimed under Section 54 on reinvestment in a residential house subject to satisfying the conditions in those Sections or can be claimed under Section 54EC by investing in certain specified bonds and by satisfying the other conditions in the Section.

What is the maximum amount that will qualify for deduction under Section 80C and under Section 80CCC?

Will medical reimbursement exceeding Rs 15,000 per annum by an employer to his employees be chargeable to tax in the hands of the employees? Will the expenditure incurred on the treatment in a government hospital or an approved hospital met by an employer on behalf of the employee be taxable in the hands of the employees? K. V. Jayaprakasan

The maximum amount that will qualify for deduction under Section 80C in respect of certain payments and investments will be Rs 1 lakh.

The maximum amount that will qualify for deduction under Section 80CCC in respect of premium paid for an annuity policy to an insurer will be Rs 10,000.

It may, however, be noted that Section 80CCE restricts the total amount of deduction that can be claimed under Section 80C and under Section 80CCC to Rs 1 lakh.

Medical reimbursement exceeding Rs 15,000 per annum given by the employer to his employees will be taxable in the hands of employees.

Expenditure on medical treatment in a government hospital or a hospital approved by the Chief Commissioner which is met by the employer on behalf of the employees will not be taxable in the hands of the employees.

Will overseas allowance given during travel by the employer to the employees be taxable in the hands of the employees? Rajaram J

The Board has through Circular No.8 of 2005 clarified that living allowance given to employees by an employer while on tour abroad will not be taxable in the hands of employees. This is so even if the same is not fully spent by them.

It has, however, clarified that the allowance will be subject to fringe benefit tax.

Mail your queries to taxtalk@thehindu.co.in or by post to `Tax Talk', Business Line, Kasturi Buildings, 859, Anna Salai, Chennai-600002

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