Are PPF, mediclaim a must in new tax regime?

I am planning to opt for the new tax regime while filing my income tax return (ITR) for the assessment year (AY) 2024-25. Should I continue to deposit ₹1.5 lakh per annum in public provident fund (PPF) and in my mediclaim? Is it necessary to show these two items in my ITR under the new regime?

—Name withheld on request

The Income-tax Act, 1961, provides an option to file the tax return using the default new tax regime (applicable for AY 2024-25) under section 115BAC of the Act or opting for the old tax regime. These tax regimes differ vis-à-vis the tax rates and the availability of certain deductions/exemptions while calculating your taxable income.

The new tax regime does not pose any restriction on making deposits in PPF account or paying medical insurance. It only stipulates that under the new tax regime, deduction under Section 80C (which covers investment in PPF account) and section 80D (which covers medical insurance premium payment) of the Act, cannot be claimed. Considering that the said deductions are not allowed under the new tax regime, the same are also correspondingly not required to be reported while filing the tax return. However disclosures in the asset schedules, as applicable, will continue even under the new tax regime.

Please note that these deductions continue to be available if a taxpayer chooses to opt for old tax regime, subject to prescribed limits.

My father-in-law wants to gift my wife approximately ₹30 lakh, which we intend to use to pay off our housing loan. As the sole borrower of the home loan, what is the most suitable approach to ensure there are no tax liabilities?

Can my father-in-law gift this amount directly to my wife, allowing us to use it for loan repayment without incurring any income tax? Alternatively, should we consider adding my wife as a co-borrower to the loan before paying it off? Or is it possible for my father-in-law to gift the money directly to me?

—Name withheld on request

As per the provisions of section 56(2)(x) of the Income-tax Act, 1961, any sum of money or value of property received from ‘relative’ is not considered as taxable income in the hands of the recipient. The definition of ‘relative’ for this purpose covers ‘spouse, ‘any lineal ascendant or descendant of the spouse of the individual’ or ‘any lineal ascendant or descendant of the individual’.

Thus, a sum of money received by you as gift from your father-in-law directly or from your wife is not taxable in your hands. Similarly, any sum of money received by your wife from her father as a gift (and, in turn, gifted to you), shall not be considered as a taxable receipt in her hands.

Parizad Sirwalla is partner and head, global mobility services, tax, KPMG in India.

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