Overseas medical insurance policies - whether covered under Sec. 80D

QUESTION: Sec. 80D of the Income-tax Act provides for deduction in respect of medical insurance premia paid by cheque on the health of the assessee or his spouse or parents up to a maximum of Rs. 10,000. Newly inserted proviso to Sec. 80D(1) through Finance Act, 1999, provides for permissible deduction in this regard up to a maximum of Rs. 15,000 in the case of senior citizens in relation to assessment year 2000-2001.

Could you kindly clarify, whether such deduction will be permissible in respect of medical insurance premia paid for overseas medical insurance policy taken for short periods, say three months/six months to cover stay abroad? If it is admissible, then whether in the case of Videsh Yatra Mitra policy which covers other items apart from medical insurance, can one claim deduction of medical insurance premium up to the amount payable for overseas medical insurance policy?

ANSWER: Sec. 80D allows medical insurance premia to cover the health of the assessee, spouse, dependent parents and dependent children subject to maximum of Rs. 10,000 from assessment year 2000-2001. Senior citizens are entitled to a higher deduction of Rs. 15,000. But proviso to Sec. 80D makes it clear that the policy should be in accordance with a scheme framed in this behalf by the General Insurance Corporation of India and that it should have been approved by the Central Government in this behalf.

The scheme that has been approved under Sec. 80D is described as ``Hospitalisation and Domicilary Hospitalisation Benefit Policy". Policies framed according to this scheme are only eligible for deduction under Sec. 80D. The very first clause of the scheme confines the benefits to ``80 per cent of the amount of such expenses as are actually and necessarily incurred in respect thereof anywhere in India...."

Hence, overseas medical insurance policy and much less Videsh Yatra Mitra will not be covered under Sec. 80D.

Gold deposit scheme

Q: Could you give some details about Gold Deposit Scheme?

A: Gold Deposit Scheme has been notified in GSR No. 634(E) dated September 14, 1999 (1999) 240 ITR (St.) 1. This has been made in pursuance of the announcement in the Budget for 1999-2000. The notification is a short one. It empowers the Reserve Bank of India to designate banks authorised for operating the scheme, collect gold tendered by a subscriber in the form of bars, coins and gold jewellery against receipt described as Gold Certificate. The receipt would be for the gold on its being `assayed and accepted' by the bank.

The receipt at the option of the depositor need not be in the form of gold certificate but can well be in the form of statement of accounts or a passbook apparently for the benefit of those who would like to operate the same by deposit and withdrawal. There can be a lock-in-period after which it is open to the depositor to withdraw the same even prematurely either gold or equivalent amount in value in cash, whether from bond or account. Nomination facility is also available. Gold certificates are transferable by endorsement and delivery. The scheme would remain in force only till further notice.

The gist of the scheme has been given in the preceding paragraph. More details can be known only from the designated banks. Nominal interest is also given, while the scheme more or less provides for custody of customers' gold without charge with the benefit of increased value of gold or for that matter, subject to the loss of fall in value, which at any rate will be the same, if the gold had been kept in personal custody. The small interest is, therefore, not comparable with interest on other investments, where the principal is returned only with reference to the money value. Hence, gold deposit scheme should be welcome for persons who keep sizable amount of gold idle in locker or at home.

TDS on rent

Q: I have a dispute with a tenant. I have moved the court for fixation of fair rent, while the company has been paying the monthly rent previously fixed. Suddenly they have increased the tax deduction at source on the ground that they are providing rent demanded by me in their books and that they have been advised to deduct tax on that basis. Is this right?

A: Sec. 194-I requires deduction of tax at source (TDS) even at the time of credit of rent to the account of the payee or on payment of cash or cheque as long as the gross rent amount exceeds Rs. 1.20 lakhs per annum. Even credit to a suspense account or account in any other name for this purpose would be treated as credit to the payee. Probably, the amount had been credited to a provision account in the books of the payer.

How far is the deduction warranted, when the matter is in dispute? Sec. 194-I does not provide for such a situation, but a disputed rent credited to a suspense account cannot possibly give rise to TDS, because a disputed amount pending in a court cannot be taken as due till the matter is adjudicated upon by the court or is accepted by the payer himself following the rationale of the Supreme Court decision in Hindustan Housing and Land Development Trust (1986) 161 ITR 524. Even so, the apprehension of the payer cannot be ruled out as unjustified. The taxpayer in such a case could get authorisation from the assessing officer for deduction at a lower rate as warranted in his case by making an application in Form No. 13 to the assessing officer under Sec. 197 of the Act.

S. Rajaratnam

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