The Hindu Business Line : Paralysed by a tax problem

MY MOTHER suffered a paralytic attack and was hospitalised. She was attended on by a neurologist at a reputed hospital. I had to spend Rs 45,000 on her treatment. But the doctor says that I don't qualify for any income-tax benefit under Section 80DDB. Please clarify whether I am eligible or not. - S. N. Vanjiappan, Coimbatore

As per Rule 11DD made in the context of Section 80DDB as was in force till the assessment year 2003-2004, paralysis resulting in a disability level of 40 per cent or more is eligible for the tax benefit under Section 80DDB. Accordingly, it is for the neurologist to consider whether the impairment is at least to this extent. You say the treatment was given in a reputed hospital. But the section requires a certificate from a neurologist working in a government hospital to this effect. And you have to attach this certificate with your income-tax return. The maximum amount deductible however is restricted to Rs 40,000.

Liquor contract

A PERSON obtained contract from the government to sell country-made liquor. Later he formed a partnership firm to which this contract was implicitly transferred. Will the tax collected at source under Section 206C abate against the assessment of the firm? Or can the assessing officer (AO) contend that what was collected from a partner cannot be set off against the tax liability of the firm? - Y. Subba Rao, e-mail

Yes, tax collected from a partner can abate against the tax liability of the firm. The AO cannot possibly deny the fact that though the contract was obtained in the individual name of one of the partners, the resultant purchases therefrom did not go to the individual business of the said partner but to the firm.

In other words, the profit from this contract accrued not to the individual partner but to the firm. If this is granted, there should be no difficulty or hesitation in granting the abatement of tax collected from the individual partner against the tax liability of the firm.

One roof

I AM a CA student. I frequently come across the term `bancassurance'. What does it mean? - Nandini Rajagopalan, Chennai

Bancassurance had its origin in France. It means doing banking and insurance business under one roof. It makes eminent practical sense. A bank already has the establishment and infrastructure for doing banking business. All that it has to do is slightly tweak the system to accommodate sale of insurance policies as well. Overheads are thus better recovered.

A banker who keeps an eye on your balance may persuade you to buy an insurance product. With banks branching off into insurance business in a big way, the country will witness more and more of bancassurance. But admittedly the skills required are different.

Either a banking specialist has to learn insurance business and vice-versa or two separate set of employees, one for banking and other for insurance, may share the same infrastructure. But the first option which postulates a dual role for employees is more economical and cost effective.

`Defined' defined

I AM a commerce student. What is a `defined' pension plan? - Sudhakar Rao, Mangalore

Government employees who joined service prior to January 1, 2004, are eligible for pension on their retirement provided they have completed a given number of years of service. The pension is roughly 50 per cent of the last salary. This is defined pension.

Defined pension has been bleeding the government white. Railways, one understands, incurs the second largest expenditure on pension after salary. The government has, therefore, come up with a new contributory pension scheme for government employees joining service on or after January 1, 2004. Ten per cent of employee's salary would be deducted and transferred to his pension account.

The employee has the choice of choosing an investment avenue which is entirely equity or which is entirely debt or a balanced one. On his retirement his pension would depend upon what he has accumulated in his pension account.

New goodies

SALARIED persons having salary income up to Rs 1.5 lakh have been spared the burden of filing return. What else is there in the recently unfolded mini-Budget from the income-tax angle? - Premlata Ahuja, Chandigarh

It seems the exemption from filing return is on only when the salaried person has no other income and his salary income does not exceed Rs 1.5 lakh. One hopes the reference to other income is taxable income. For example, if one's salary is Rs 1.4 lakh and his interest income from savings bank is Rs 5,000, hopefully he should not be required to file return because the interest income would be tax-free under Section 80L.

The threshold of Rs 1.5 lakh seems to be reasonable given the fact that salary in excess of this would most certainly give rise to other income. The other relief is exemption from filing returns for senior citizens if they have no taxable income but are otherwise enjoined to file one under the economic criteria scheme.

MPBF of yore

IS THE concept of MPBF still in vogue in the banking sector? - Madusudan Gaekwad, Baroda

The RBI does not insist on a rigid formula of maximum permissible bank finance (MPBF) for lending by commercial banks to industries for working capital purposes.

This was given up sometime in 1997. Banks, however, are free to follow the earlier norms of MPBF based on norms for stock, debtors, and so on.

With the NPA bugbear constantly unnerving the banks, security and repayment capacity ranks much higher than MPBF.

MPBF was relevant in an era of capital scarcity. Now things have changed. It is now a problem of plenty.

50 and fearing

I AM a 50-year-old. I bought a house recently with borrowed funds. I am constantly nagged by a fear. The housing finance company may takeover my house in case of my untimely death before the repayment period. What should I do? - Dakshinamurthy, Chennai

There are insurance policies available to guard against this. Get in touch with a reputed insurance company.

You can buy peace of mind by paying a small insurance premium every year.

Should you survive and live to see the end of the mortgage, all that you would have lost is the insurance premia.

But in the event of your premature demise, the insurance company will take over your loan and discharged the remaining EMI obligations.

(ASK! Send in your queries on accounting, auditing, corporate law and taxation to ask@thehindu.co.in)

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