Q I would like you to guide me as to how payment received on maturity of NSC during this financial year is to be treated. Does it need to be included as a part of income? If yes, should we include the principal amount or the total amount, including the interest? I am told fixed deposits in banks or post offices can be claimed as deduction under Section 80C within the overall '1.5 lakh limit.
Prajwal
Via email
A) The interest accrued on NSC has to be shown as income every year and the same amount can also be claimed under Section 80C as being re-invested every year. However, since you have not admitted the interest income in earlier years, the same may be included in the financial year in which the NSC has matured. There will be no liability on the principal amount received back on maturity. Deposits as five-year time deposits (fixed) in banks/ post offices with the tax-saver option are also included in the list of admissible deductions under Section 80C.
Q My company has made arrangements for a group mediclaim insurance with National Insurance Company. As a result, there is a substantial reduction in the premium which is paid by the company and recovered from our salary. The insurance company issues the receipt in the name of the company. Will it be possible for me to claim deduction in respect of the premium that is recovered from me under Section 80D? Can the employer take cognisance of the same in deducting tax at source?
Krishna Sharma
Via email
A) Section 80D of the Income-Tax Act allows deduction in respect of medical insurance premium paid by an assessee by cheque in previous year out of his income chargeable to tax .This insurance premium should have been paid to effect or keep in force an insurance on the health of the assessee or the spouse of such an assessee or parents or dependent children of the assessee where such assessee is an individual.
There should be no difficulty in claiming a deduction in respect of the premium paid by the employer to National Insurance Company and recovered from the employee so long as the employer has made such payment by cheque. Since the premium is recovered from the employee’s salary, it can definitely be said that the premium is paid out of the income chargeable to tax of the employee. The employer can take cognizance of the insurance premium in computing the tax that is to be deducted at source.
Q After my resignation, the accumulated superannuation fund was used for five-year pension. I didn’t opt for one-third commutation, which is tax-free and used the amount for five years. Since I haven’t availed the commutation amount, can I claim a one-third tax-free deduction? Should I show the pension in my tax calculation?
Murthy Prasad
Via email
A) The tax exemption available under Section 10 (10A) of the Income-Tax Act for the commutation of pension is specific. Since you had not opted for commutation, you cannot claim the exemption.
(The writer is a Hyderabad-based CA. He can be reached at info@rathiandmalani.com)
