Photo: iStock
Photo: iStock

NRIs can claim tax deduction for medical insurance premiums

You can continue to claim deduction from taxable income in India for medical insurance premium paid even if you are outside India or qualify as a non-resident in India

I moved to China last year. I may be here for at least 13-15 months. Since this period is short, I want to continue my health insurance in India. Will I continue to get the related tax benefits as well? 

—Kabil Deb

Under Section 80D of the Income-tax Act, 1961, an individual may claim deduction for medical insurance premium paid in India as follows:

a. Medical insurance premium paid by the individual for the benefit of self, spouse and dependent children up to Rs25,000; and

b. Medical insurance premium paid by the individual for the benefit of parents of the individual up to Rs25,000.

In case the medical insurance premium has been paid for the benefit of a senior citizen (aged 60 years or more), the deduction available is up to Rs30,000. Budget 2018 had proposed to increase the limit for deduction from Rs30,000 to Rs50,000 in case of senior citizens with effect from 1 April 2018. Given the above, you can continue to claim deduction from taxable income in India up to the monetary limits specified above for medical insurance premium paid even if you are outside India or qualify as a non-resident in India.

I am renting out my house in Pune to a family. Will TDS apply on the rental amount (Rs28,000 per month)? Is there any tax deduction available on this? 

—Senthil

Under the income-tax law, the tenant is required to deduct TDS at the rate of 10% on rent paid to the house owner, except for the following:

(a) The tenant is an individual but not liable for tax audit under Section 44AB; or

(b) The rent paid or payable for the total financial year does not exceed Rs1.8 lakh.

Under Section 44AB, the books of accounts of an individual are required to be audited by a chartered accountant if the total sales, turnover or gross receipts exceed prescribed monetary limits depending on whether it is a business or profession.

Further, in case of an individual (even though not liable for tax audit), TDS at the rate of 5% is required to be deducted by the tenant where the rent amount exceeds Rs50,000 per month.

In your case, assuming the tenant is an individual but not liable for tax audit and you do not qualify as a non-resident in India, there is no requirement to deduct TDS at rental amount of Rs28,000 per month.

Rental income from house property situated in India is liable to income-tax in India. The method of computing taxable rental income is prescribed under the income-tax law as follows:

Gross annual value less municipal taxes gives the net annual value (NAV). Reduce standard deduction of 30% of NAV and interest on housing loan from this, which will then be the taxable rental income.

Gross annual value is higher of the following:

(a) Amount at which the property might reasonably be expected to be let out; or

(b) Actual rent received or receivable.

In other words, gross annual value compares the actual rent received or receivable with expected rent that the property would fetch.

Also, any repayment of principal amount against a housing loan taken for such property is also eligible for deduction under section 80C (maximum deduction under this section is Rs1.5 lakh).

My income in India is limited to some dividends and fixed deposits, the total of which amounts to not more than Rs1.6 lakh a year. Of this, Rs90,000 comes from fixed deposits and the rest is from mutual fund dividends. How will these amounts be taxed? 

—Mira Krishna

Interest income from fixed deposits is taxable in India. Accordingly, banks will deduct withholding tax on your interest income from fixed deposits in India. Dividend from mutual funds is exempt from income tax in India. 

In case your total income in India does not exceed the maximum amount not chargeable to tax (i.e. Rs2.5 lakh) for the relevant financial year, you are not liable to pay tax and not liable to file an India income-tax return. In such a case, you may either file a Form 15G or a Form 15H to the bank to not withhold tax on your interest income or file an income-tax return to claim refund of excess tax withheld.

Queries and views at mintmoney@livemint.com

Sonu Iyer is tax partner and people advisory services leader, EY India

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