No tax benefit if mediclaim premium is paid in cash

Senior citizens can get tax deduction up to Rs.30,000 on health cover premiums

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I pay the health insurance premiums for both myself (67) and my wife (63). Would I get tax exemptions on both?

—Shayan Basu

An individual can claim tax deduction on payment made towards health insurance premium under section 80D of the Income-tax Act, 1961. The deduction can be availed on premium payment for self, spouse, dependent children and parents subject to prescribed conditions.

For senior citizens (above 60 years), during a financial year (FY) the deduction is restricted to Rs.30,000 (including Rs.5,000 towards preventive health check–up). However, this benefit is not available if premium is paid by cash. Since you are paying for health insurance for yourself and your spouse, and both of you qualify as senior citizens during FY17, you can claim up to the maximum deduction of Rs.30,000 in aggregate, for the both of you.

My provident fund (PF) subscription is less than 5 years old with my previous employer. I have got a job in another company and want to withdraw the PF amount maintained with the old employer. Will I be taxed?

—Rakhi Sharma

PF withdrawal is taxable in the same FY if it is withdrawn without rendering continuous services for 5 years, as per the Act. However, if the accumulated PF balance maintained with the old employer is transferred to the PF account of the current employer, then the period of previous employment is also included as part of continuous service.

Assuming that your job with the ex-employer was your first one, or that you had not transferred your PF balance with your employer (if any) before that—as the total period of service with the ex-employer is less than 5 years—withdrawal of accumulated PF balance shall be taxable.

If the employer maintains a private PF trust, the tax would be deducted at source. In this case, you will receive the Form 16 issued by the PF trust depicting the taxable income and taxes deducted. If the PF trust has not deducted the tax, then you should report the income in your tax return and pay taxes.

If the PF balance is maintained through the Regional Provident Fund Commissioner, taxes may be deducted at the rate of 10% if amount of withdrawal exceeds Rs.50,000.

If you transfer the accumulated old PF balance to the new employer and, in future, withdraw the accumulated PF balance maintained with the new company, while computing the period of continuous service, the period of service rendered with the earlier company will also be included.

If the cumulative years are likely to be more than 5 years, there will not be any tax implications on PF withdrawal.

PF withdrawal can be as per the provisions of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, which requires you to have a non-employment period of two months after leaving your job.

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