R Maheswari, wife of A Rajendran, used to run a business. She expired. She left five five deposits of around ₹10 lakh in a private bank. For all these deposits, the nominee was me, R Gurumanoj.

When requested to pay the deposit amounts to the legal heirs of the deceased, the bank refused. It said it will pay the nominee. My query is: if I receive the deposit amount as a nominee and transfer the entire amount to the legal heirs of the deceased, will I have to include this deposit amount in my income and pay tax accordingly? I am a senior citizen aged 64. My annual income is ₹3 lakh. My IT returns are filed every year. I am not related to the depositor — just a nominee.

R Gurumanoj

As per Section 56(2)(vi) of the Income Tax Act, any sum of money, received without consideration, in excess of ₹50,000 will be taxable in the hands of the recipient. However, there will not be any tax liability if such amount is received in contemplation of the death of the payer.

As per a Master Circular issued by the RBI, it has been made clear that the survivor(s)/nominee “would be receiving the payment from the bank as a trustee of the legal heirs of the deceased depositor, i.e., such payment to him shall not affect the right or claim which any person may have against the survivor(s)/nominee to whom the payment is made.”

In view of the above circular and based on past judicial precedents, it may be construed that the nominee just passes the asset to the legal heirs, and ought not be regarded as the owner of such assets. Therefore, if you (being a nominee) receive the deposit merely as a ‘trustee of the legal heirs’, it may not be construed as income and may not attract tax. Keep supporting documents related to such transfer of deposits in place to address any query from the Tax Department.

What is the income tax treatment of gifting of an ELS fund of more than three years to my son?

Xavier PD

Gift of shares/ELSS (equity-linked savings scheme) to your son shall not be regarded as income in the hands of your son and not chargeable to tax as per Section 56(x), read with Section 47, of the I-T Act.

What are the rules and procedures for claiming deduction under Section 80DDB of the Income Tax Act?

SPR Kumar

As per Section 80DDB of the I-T Act, any expenditure incurred by a resident individual or HUF (Hindu United Family) towards medical treatment of specified diseases (such as neurological diseases, malignant cancers, chronic renal failure, etc, as specified under Rule 11DD of Income Tax Rules) during a financial year can be claimed as a deduction from taxable income. An individual is also eligible to claim the deduction for his/her dependent spouse, children, parents, brothers and sisters. In case of an HUF, a dependent member is covered.

The amount of deduction is limited to the amount of expenses actually incurred or ₹40,000, whichever is less. From FY 2018-19 onwards, senior citizens (aged 60 years or more) may claim deduction of up to ₹1 lakh. Further, any amount received from the insurer or a reimbursement from the employer shall be reduced from the amount of deduction.

It is imperative to obtain a prescription for specified medical treatment from a medical practitioner as mentioned under Rule 11DD(2).

As per Rule 11DD(3), the prescription should contain the name and age of the patient; the name of the disease/ailment; and the name, address, registration number and qualification of the specialist issuing the prescription. In case the treatment is received at a government hospital, the prescription should include the name and address of the hospital as well.

The writer is Partner, Deloitte India. Send your queries to taxtalk@thehindu.co.in

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