The Hindu Business Line : Premium paid for parents not exempt

I am a salaried individual and I pay life insurance premium and mediclaim for both my father and mother out of my salary. While my father receives pension, my mother is a housewife.

Can I claim tax benefits in respect of the premium paid towards my parents’ life insurance and mediclaim policies? What declaration should I submit to get the tax exemption, if any? — Anandhan

The deduction under Section 80-C in respect of the life insurance premium will be available to an individual for the premium paid in respect of such individual, the spouse of such individual or any child of such individual.

Therefore, the life insurance premium paid to insure the life of your father and mother will not be eligible for the deduction.

The deduction under Section 80-D in respect of medical insurance premium is available to an individual where it is paid to insure the health of such individual, the spouse of such individual, dependent parents or dependent children of such individual.

The word ‘dependent’ is not defined in the Section and it should be understood as a person who is wholly or mainly dependent on the individual and probably should also be understood not to mean mere financial dependence.

I currently reside in Hyderabad in a rented house. I also have an own house, in which my family stays, for which I have taken a housing loan and I am claiming the interest paid on the said housing loan as deduction under Section 24 and the principal repayment on the said housing loan as deduction under Section 80-C.

As I am paying rent for the property, in which I am staying at Hyderabad, can I claim the benefit of exemption in respect of house rent allowance while also claiming the benefits under Sections 24 and 80-C in respect of the housing loan? — S. Chidambaranathan

There should be absolutely no difficulty in your claiming the exemption under Section 10 (13A) in respect of the house rent allowance. The only conditions for the claim of this exemption is that you should be in receipt of HRA and should also be paying rent. Therefore, so long as you are in receipt of HRA, this exemption should be available to you.

In so far as claiming the tax benefits under Section 24 and under Section 80-C in respect of the interest on the housing loan and the principal repayment on such loan, there should again be no difficulty in such claim. The issue that may, however, arise is whether the property in which your family is staying can be treated as self occupied so as to take the net annual value of the same as NIL.

It appears that this should also be possible and it is not required that the assessee himself should be in occupation of the house property to get this benefit.

So long as his family is living in such house property and there is no rental income earned, the same should be possible.

I do online trading in shares and I want to know whether the profit that I earn out of these transactions are chargeable to tax at 10 per cent or at the normal tax slab applicable to me?

I also trade in futures. What will be the tax treatment of this transaction? — S. Ramamurthi

The trading in futures and options will normally be considered as a business and be taxed under the head profits and gains of business or profession.

Futures and options are transactions done without actual delivery and therefore by virtue of Section 43(5) would be treated as a speculative business except if the transaction is carried on through a registered broker or sub-broker or by banks or mutual funds and where the transaction is carried out electronically on screen based systems and which is supported by a time stamp contract note which indicates the client identity and the number allotted under the SEBI Act or the SCR Act or the Depositories Act and also gives the permanent account number of the client.

Trading in shares may be treated as business income or as capital gains depending on various factors including the volume of transactions, whether the funds used are own funds or borrowed funds etc. If the transactions are treated as forming part of a business, the gain will be taxed at the normal rates of tax applicable to you.

You can, however, claim rebate in respect of the securities transaction tax paid by you under Section 88E.

The rebate that can be claimed by you will be the lower of the tax payable on the business income (computed at the average rate of income tax) or the securities transaction tax paid by you.

If the transactions are of such nature as to be charged under the head capital gains, the gains will be taxed at 10 per cent (as increased by the appropriate surcharge and additional surcharge) if the gain is short-term and will be exempt if the gain is long-term provided securities transaction tax is paid at the time of sale.

I have two houses for which I have taken housing loan.

One of the house is self occupied and the other is treated as deemed to be let out.

I am offering to tax the notional rent on the property, which is deemed to be let out.

Can I claim deduction under Section 24 in respect of the interest paid on the housing loan and deduction under Section 80-C in respect of the principal repayment of the housing loan, for both the house properties? — Sudhir R. Singh

You can claim the deduction under Section 24 in respect of the interest on both the housing loans and also the deduction under Section 80-C in respect of the principal repayment for both the housing loans.

You may note that in respect of the property that is self occupied, the maximum amount of interest that can be claimed under Section 24 is Rs 1.5 lakh while in respect of the property that is deemed to be let out and where notional rent is offered, the deduction under Section 24 can be claimed without any ceiling limit.

You may also note that the deduction under Section 80-C will be available only up to a maximum of Rs 1-lakh and also that Section 80-C provides for a deduction in respect of certain payments and investments which also includes the principal repayment of a housing loan taken from a bank or financial institution.

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