If You Sell Your House Before Two Years, You Will Be Taxed For Short-Term Capital Gains

Question - My wife and I are both senior citizen. We have taken a health insurance policy for both of us and have paid a premium of Rs. 55,000 for the current year. We have also paid Rs. 24,500 for a health insurance policy bought for my son’s family. How much deduction can I claim for the health insurance premium paid? I also have a Hindu Undivided Family (HUF). 

Answer - An individual can claim deduction under Section 80D of the Income Tax Act, in respect of health insurance premiums paid for himself, his spouse, dependent children, and parents, whether they are financially dependent or not. A HUF can claim a deduction for the premiums paid for any member of the HUF.

The deduction available to an individual is restricted to Rs 20,000 for his family. One can also claim an additional deduction of Rs. 25,000 towards the health insurance of the parents. In case where the person for whom the premium is paid is a senior citizen, a higher deduction of Rs. 50,000 is available.

Since your son is financially independent of you, you cannot claim the deduction in respect of the health insurance premium paid for his family. However, as you have an HUF, you can instead pay the premium for your son’s family from the HUF’s account and claim a deduction of Rs. 24,500, as all the people in your son’s family are members of your HUF.

If you or your HUF do not have enough taxable income, your son can pay for his family, as well as for both of you, and claim a deduction of Rs. 74,500 (Rs 50,000 + Rs. 24,500) in his income tax return under Section 80D of the Income Tax Act, 1961.
 
Question - I have sold a flat during the current year which was bought last year. Can I pay a short-term capital gains tax at 15 per cent flat instead of adding it to my regular income? Can I calculate the capital gains after deducting the indexed costs using the cost inflation index? 
Answer- Since you have sold the flat before completing 24 months, the profits are to be taxed as short-term capital gains. The benefit of the flat rate of 15 per cent is available only for capital gains on listed equity shares and units of equity-oriented schemes of a mutual fund on which securities transaction tax (STT) has been paid. Short-term capital gains from all other capital assets are treated as regular income and are required to be added to your regular income and taxed at the slab rate applicable to you. In your case, as the capital gains arise from the sale of assets other than the listed shares, or units of equity-oriented schemes, you will have to pay the tax at the slab rate applicable to your income. The benefit of indexation is available only for long-term capital gains, and because profits on the sale of your flat are short-term capital, you cannot take advantage of it.
 
Balwant Jain is a tax and investment expert.

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