The author is a tax and investment expert
You can claim an amount of Rs 5,000 for preventive health check-up. Surrender value of pension plan is taxable if deduction has been claimed under Section 80CCC. Switching from dividend to growth option or vice-versa in an ELSS is allowed only after three-year lock-in
I am a single person aged 45 years. How much tax benefit can I claim on a mediclaim policy for myself and my senior citizen parents?
The Income-tax Act, 1961 provides for tax benefits in respect of premium paid for health insurance, popularly known as mediclaim, under Section 80 D.
There are two categories for which you can claim this deduction. Under the first category, you can claim it for yourself, your spouse, and your dependent children. Under the second category, you can make a claim for your parents.
A maximum deduction of Rs. 25,000 available is for each of the category. In case the person, in respect of whom the premium is being paid, is a senior citizen, then the maximum deduction available goes up to Rs. 50,000. So you will be able to claim a maximum deduction of Rs. 75,000, i.e., Rs 25,000 for yourself and Rs 50,000 for your parents.
Within these limits of 25,000 or 50,000 as the case may be, you can also claim an amount up to Rs. 5,000 each for preventive health check-up for yourself as well as for your parents. Please note that the premium of mediclaim should not be made in cash, otherwise you will not be able to claim the tax benefits. Cash, however, can be paid for preventive health check-up. The deduction under Section 80D is not available if you opt for the new tax regime.
I had purchased a pension plan from ICICI Prudential Life in Aug 2019. After paying premium from 2019 to 2023, I stopped paying further premium. Now I have surrendered my policy and received Rs. 62,000 from the insurance company. I want to know whether the amount received by me is taxable or tax-free. If it is taxable, then how much amount is taxable?
I assume you had availed tax benefits under Section 80CCC for the premiums paid for this pension plan. Under the provisions of Section 80CCC, any money received on surrender of any pension policy for which deduction under Section 80CCC was claimed, becomes fully taxable in the year in which the policy is surrendered.
In case deduction was not claimed, you can treat the premiums paid as investment and offer the difference as capital gain after applying indexation on the premiums paid. The tax will be payable at a flat rate of 20 per cent on the indexed profits so computed.
If I switch my existing equity-linked savings schemes (ELSS) from the dividend option to the growth option, can I still claim tax benefit under Section 80C for the amount switched?
You can make a switch in the ELSS only after completing the mandatory three-year lock-in. The investment made by switching from the old ELSS to new ELSS scheme is treated as fresh investment for tax purposes, and you will be eligible for tax benefits on the amount so switched.
Do note that switching from one scheme to another is treated as redemption for tax purposes. You will have to pay long-term capital gains (LTCG) tax on the difference between the cost of the units switched and the amount switched to the new scheme.
Since the units will be switched after one year, the profits will be treated as LTCG and will be taxed at a flat rate of 10 per cent after the initial Rs 1 lakh, which will be taxed at nil rate, making it effectively tax-free. The initial exemption is to be computed with reference to all the LTCG realised on listed shares and equity-oriented schemes on which security transaction tax (STT) has been paid.
The author is a tax and investment expert
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