I am a retired government servant and a senior citizen getting pension, and have no insurance policy. Kindly explain the procedure for deduction of a maximum of ₹50,000 under Section 80D of Income Tax Act introduced last year. Can I add amounts of different test reports (for eg, urine, blood, ultrasound, MRI, etc) and registration fee of hospital to the total deduction amount within the limit of ₹50,000? Do receipts of medicines and test reports need to be verified by concerned doctors; how long should I preserve theses documents?

S Chandra Saxena

As per Section 80D of the Income Tax Act, any amount paid towards medical expenditure on the health of a senior citizen (aged 60 years or above) is allowable as a deduction, up to a maximum of ₹50,000, provided no amount has been paid to effect or to keep in force health insurance for such person.

Further, such payment should have been paid by any mode other than cash.

The term medical expenditure has not been defined in the I-T Act. However, medical expenses incurred for doctor’s consultation fees, medicines, diagnostic tests, etc, should qualify for claiming the deduction benefit under Section 80D.

Generally, medical prescriptions and test reports are signed by the respective doctors, and the same, along with medical receipts/payment voucher/bills should serve the purpose for claiming the tax benefit as explained above. It is recommended to maintain the supporting documents for a period of two years. However, in specific circumstances, the tax authorities can go back up to six years to review tax returns.

Considering the same, the maximum time period for retention of documents can be regarded as seven years.

I am an NRI. Given the current stock market scenario, I would like to start investing. I intend to invest on a long-term basis. How would I go about filing the tax return on the earnings from the stock market? I have an NRO account through which I intend to invest.

Adi

Tax-filing requirement: Every individual is required to file income tax returns (ITR) if his/her total income exceeds the basic exemption limit (₹2.5 lakh for individuals not being resident senior citizens) as per Section 139 of the I-T Act.

We are given to understand that you qualify to be a non-resident in India for FY2020-21.

If your earnings from the stock market along with any other income earned/received in India exceeds ₹2.5 lakh, you shall be required to file India ITR for FY2020-21.

Earning from stock market: Typically, earnings from the stock market could be dividend income and/or capital gains.

As per Section 112A of the I-T Act, long-term capital gains (LTCG) in excess of ₹1 lakh from sale of listed shares are chargeable to tax at the rate of 10 per cent.

In addition to this, surcharge (if applicable), and health and education cess at 4 per cent shall apply.

Further, it may be noted that effective from FY2020-21 (April 1, 2020 to March 31, 2021) dividend distribution tax has been abolished; consequently, dividend income from shares/units are taxable in the hands of the shareholders.

I am a regular reader of your Monday edition BL Portfolio . Kindly tell me how to ascertain long-term capital gain/loss on shares sold in FY19-20, where the data on cost of their purchase is not available. In case the traded value as on January 1, 2018, is to be considered, how to obtain it?

Srikanth Mahajan

We understand that the shares are listed on a recognised stock exchange in India. You can request your stock broker to provide the traded value of your listed shares as on January 31, 2018, to determine the cost of acquisition for LTCG/loss workings.

As per Section 112A of the I-T Act, LTCG in excess of ₹1 lakh earned from sale of listed shares are chargeable to tax at the rate of 10 per cent. Surcharge (if applicable), and health and education cess at 4 per cent shall apply additionally.

Where the shares are purchased before January 31, 2018, the cost of acquisition shall be higher of the following:

· actual cost of acquisition, or

· lower of (i) fair market value (FMV) of such share on January 31, 2018 (highest quoted price), or (ii) full value of consideration as a result of transfer.

The FMV of a listed equity share would be the highest price quoted on the stock exchange as on January 31, 2018.

If there was no trading in such shares on this date, the FMV shall be the highest price of shares on a trading date immediately preceding January 31, 2018.

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

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