I would like to gift Rs 1 lakh to my mother. Kindly let me know the procedure to be followed to avail the income tax benefit.

1. Whether I have to make any kind of deed on any bond paper? If yes of which value?

2. Whether the same has to be registered. If so what will be the stamp duty to be paid?

3. At present my mother is a house wife without any independent income.

4. Whether my mother should hold any separate SB account on her name?

At present she is holding a joint account along with my father as the first person and the account can be operated by any one or survivor.

?Usha Reddy

Any transfer to the account with your father’s first name would be treated as a gift from you to him. If your intention is to gift the funds to your mother, it would be best if she opens a fresh account with her name as the first name. This account can also be jointly held with your father’s name as the second holder. The gift to your mother would be tax-free without any limit. There is no need of making any kind of formal gift deed or registering the same. A simple letter from you to your mother indicating that you are giving her the gift out of your natural love and affection for her and an acceptance letter from her would suffice. Keep these letters on file for production if the assessing officer asks for the same.

I have two housing loans of Rs 5 lakh each for a single house, which is self occupied.

One loan has been taken from my employer, Punjab National Bank, under the staff scheme at a simple rate of interest in which the principal is to be repaid first and after the principal has been fully paid, the accrued interest portion is payable. My last payment has been Rs 30,000 during the financial year 2008-2009 and the accrued interest is Rs 20,000.

The second loan has been taken under the public scheme, which is payable at a compounded rate of interest. I have repaid Rs 50,000 and interest in debit is Rs 35,000 during the financial year 2008-2009.

Please tell me how much amount is eligible for a loss on the house property on account of interest paid and payable. Please also tell me how much amount exactly will qualify under Section 80C or Section 24, whichever is applicable here.

?Shashank Aggarwal

You are entitled to the benefits of tax concessions on housing loans even if there are multiple loans taken for the purchase of a single house, as long as the total interest and the part payments of the principal amount claimed for concessions are within their respective limits.

The phrase used for availability of deduction is interest payable and not interest paid. Therefore, if the company collects the principal amount first and interest later, the borrower will be able to claim the deduction u/s 80C on a larger amount and also claim deduction of interest u/s 24 on accrual basis. The actual interest payment can wait until the principal amount is collected. Some employers, especially PSUs and banks, follow this practice. Needless to observe that the deduction for interest obtained on the basis of accrual cannot be again claimed on the basis of actual payment.

Sec 80DDB offers deduction for patients suffering from some specified terminal diseases. I am suffering from thalassamia and this disease is covered by the section. I also receive around Rs 10,000 per year from my medical insurance. I am not clear about how much deduction I can claim.

?Ved Parkash Jain

Sec 80DDB allows a deduction of Rs 40,000 for non-senior citizens and Rs 60,000 for senior citizens.

Now, the crucial aspect –

“Provided further that the deduction under this section shall be reduced by the amount received, if any, under an insurance from an insurer for the medical treatment of the person….”

We desire to make the following observations:

1. The amount of deduction is ‘Rs 40,000’ and not ‘up to Rs 40,000’. Does this mean that the deduction allowed will be Rs 40,000 even when expenses incurred on treatment are Rs 10?

2. CBDT Circular 779 dt 14.9.99 item-31 states, “The amount of deduction under the amended provision shall be worked out after reducing the amount, if any, received under any scheme of medical insurance. In other words, the deduction (subject to limits specified in the provision) would be available on the net amount after reducing the insurance receipts from the expenditure actually incurred. The benefit shall be available in cases where such expenses have been actually incurred.”

Suppose the expenses actually incurred are Rs 90,000 and the insurance amount received is Rs 30,000. The deduction will be on the net amount of Rs 60,000 and will be limited to Rs 40,000. Where however, the insurance amount is Rs 55,000, the deduction allowed will be Rs 35,000. Many experts feel that CBDT has erred and the insurance payment has to be subtracted from the ceiling and the result will be the limit up to which the actual expenses are deductible. We are not experts but beg to disagree with them. If their view is accepted, it would mean that an individual will do well by not buying any insurance against any killer diseases.

Unfortunately in the case of 80DDB, since the deduction is not statutory in nature, as is the case with Sec 80DD, an account of the expenses incurred will have to be maintained. Should the act have such minor differences for same type of situations?

I have sold my house last year in April. However, the transaction is not complete and I will receive all the money by April this year. I have earned long-term capital gains on this sale of Rs 20 lakh. Can I invest the money in bonds now to claim tax benefit? Since when are the six months counted? Is it from initial agreement date or completion of agreement.

?Ravi Ajmera

Any tax on long-term capital gains can be saved by investing the capital gain amount in bonds under Sec 54EC. There is a limit of Rs 50 lakh per financial year on investment in such bonds. The clock starts ticking from the date the property gets transferred to the buyer and not from the date you receive the entire money.

The authors may be contacted at wonderlandconsultants@yahoo.com