Income tax returns (ITR) filing: Your kin can save you from paying tax; 5 power points

Income tax returns (ITR) filing: Just like in real life, our tax laws also recognise the importance of relationship of siblings and grant us some tax benefits in respect of certain transactions. Let us see which provisions allow this benefit under the Income Tax Act:

Leave Travel Assistance (LTA)

Employees can claim full tax benefits in respect of expenses incurred on travelling outside the place of working, provided the employer pays the LTA or Leave Travel concession (LTC) subject to satisfaction of certain conditions.

The exemption is available in respect of travel undertaken within India, for two journeys during a block period of four calendar years. The current block of four years is for 2018-2021. In addition to your children, spouse and parents, you can also claim this benefit in respect of expenses incurred for any of your siblings, provided they are wholly or mainly dependent on you financially.

Exemption of gifts received

Generally all gifts received by you in a year become fully taxable if aggregate value exceeds Rs 50,000. However, certain gifts are still tax exempt in your hand even if the value exceeds Rs 50,000 in a year. These include any asset received on inheritance as per the personal law in case no will is made or those received under a will.

Likewise, gifts received at the occasion of marriage are also fully tax free in your hands. While exempting the gifts, law makers have given due recognition to the tradition of gifting among close relatives. The definition of relatives, from whom gifts received are fully exempt, includes siblings. This means you can give your siblings gifts without calling undue attention of the taxman.

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Expenses incurred for medical treatment

Deduction is allowed on expenses incurred for upkeep and maintenance of sibling/s who suffer from disability up to Rs 75,000, in a year, if you spend any money for medical treatment, rehabilitation, training of any of your sibling/s. The deduction can also be claimed if you have paid life insurance premium for a scheme of maintenance of such disabled persons like Jeevan Vishwas Endowment Assurance and Jeevan Adhar Whole Life Insurance policies of Life Insurance Corporation of India.

You can claim a higher expense of Rs 1,25,000, in case your sibling is suffering from severe disability. The word disability and severe disabilities are those are defined under “Persons with disabilities (Equal opportunities, protection of rights and full participation Act 1995” and as certified by the specialist medical professional. This deduction can be claimed irrespective of the quantum of money spent by you.

Interest on education loan

Tax benefit is available on the interest paid on education loan from specified financial institutions or charitable organisation for yourself, spouse or children. It is also applicable if the loan is taken for a sibling, if you are appointed a legal guardian of sibling.

No tax benefits

Tax deduction is not allowed for tuition fee for your sibling or for life insurance premium paid on life of your siblings. Likewise, for medical insurance premium, deduction under Section 80 D, is not available if paid for your sibling/s.

By Balwant Jain
(The writer is a tax and investment expert)