Tax benefit is available for loans taken by an assessee

I had availed of an education loan for my daughter?s studies for the MBBS course, from State Bank of Travancore (a subsidiary of SBI), Nagpur branch. The details of the receipt of loan amount are as under: –

1. Rs 71,000/- on 2-1-04

2. Rs 65,000/- on 31-5-04

3. Rs 69,000/- on 22-12-04

4. Rs 11,000/- on 31-12-04

5. Rs 74,500/- on 30-6-05

6. Rs 86,500/- on 2-1-06

7. Rs 92.500/- on 22-6-06

8. Rs 6000/- on 21-5-07

Total Rs 4,69,500/-

As per the statement made available by the bank, the total outstanding as on 31-3-2008 is Rs 6,36,36. Obviously, the difference of Rs 1,66,868 (Rs 6,36,368 (-) Rs Rs 4,69,500) is to be construed as the accrued interest on the loan.

I have paid back Rs 1,66,200 during the current financial year, i.e., 2008-09 and requested the bank authorities to give the certificate for claiming IT relief u/s 80E for the total amount of Rs 1,66,200. But, the bank authorities are of the view that the interest accrued during the current year is only eligible for tax relief. In this context, it is to be clarified that I had paid back the amount against all odds with the firm belief that I will be getting a deduction for the full amount of Rs 1,66,200.

So, clarification is requested whether the total amount of Rs 1,66,200 paid by me qualifies for deduction or not.

?RMNair

U/s 80E the following is deductible. Interest paid out of income chargeable to tax on loan taken by an individual from a bank, a notified financial institution, or any approved charitable institution u/s 10(23C) or 80G(2a) for higher education is deductible for eight successive years starting from the FY in which the assessee starts repaying the interest. The benefit is available for loans taken by an assessee for the education of spouse or children.

Obviously, the bank officials are in error. Moreover, they cannot sit in judgment on your tax matters. That is the realm of only the ITOs. The bank should give you a statement giving the principal amount along with the accrual of interest every year.

I am an income tax payee (income about Rs 10 lakh/year) and to save tax I have deposited Rs 70,000 in PPF and Rs 30,000 in term deposit under 80C. My daughter is a doctor and son is an engineer and they live separately. I am 71 years old and am in service and my wife is a housewife with some tuition income.

If I make a gift of Rs 30,000 to my wife from my post tax income, can she, legally, deposit the amount in her PPF account without the bank taking it as an irregular deposit and returning the same to me without any interest?

In an earlier Q&A you have mentioned about a Delhi high court case (R Dalmia vs CIT (1982) 133TTR149) that the savings made by the wife out of the household expenses given by the husband would be separate property of the wife and any income arising there of cannot be aggregated with the income of the husband. If this is so, the amount saved by her will be her property and she might deposit this in PPF or in term deposit and the interest arising out of this (if deposited in PPF) is already exempted from IT. But it might be difficult to convince the ITO that the amount was savings made by her from household expenses and not black money earned by her.

?RK Goyal

Contributions to Sec 80C avenues no more are required to be made out of income chargeable to tax. Your wife can make the contributions to PPF out of the money gifted by you. The question of her having saved the amount out of household expenses does not arise. However, please note that for her to claim deduction u/s 80C her income has to be greater than the contribution to avenues u/s 80C.

I am a salaried person. My father is a disabled person. I have gone through Section 80DD. In this regards I have the following query.

Disability certificate: I have attached the certificate, which has been issued to my father by the government. It is a permanent disability certificate. I have gone through the certificate format given in the Act. Both differ in some respect but the basic criteria of more than 40% disability is fulfilled.

My query.

(a) Whether this certificate is valid to get me a deduction of Rs 50,000 or will I have to take a new certificate every time I fill up my return?

(b) Is there any other section in the Act under which I can save some of my tax.

?Rajesh Kanadiya

The disability is classified into two parts as defined under the Persons with Disability (Equal Opportunities, Protection of Rights and Full Participation) Act, 1996. Disability over 40% is non-severe and that over 80% is severe. The deduction allowed will be Rs 50,000 for non-severe and Rs 75,000 for severe disability. FA04 has extended this benefit to persons with autism, cerebral palsy, mental retardation and multiple disabilities as provided in National Trust for welfare of persons.

?Dependent? includes the spouse, children, parents, brothers and sisters and in the case of a HUF, a member thereof, who is wholly or mainly dependent on the assessee and has not claimed any deduction u/s 80U in the computation of his income.

The assessee shall furnish a copy of the certificate of the medical authority under the above-referred Act along with the return of income. Where the condition of disability is temporary and requires reassessment after a specified period, the certificate shall be valid up to the FY during which it expires.

This section has been amended by FA03 w.e.f. 1.4.04. If the certificate has been issued after this date, you are entitled for claiming the benefit. Otherwise, you will have to get a fresh certificate.

Deduction u/s 80DD is statutory in nature and is allowed in full, irrespective of the actual expenditure incurred on medical treatment.

The authors may be contacted at wonderlandconsultants@yahoo.com