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Tax on post office RD for senior citizens
November, 17th 2008

I am a senior citizen and am having a post office recurring deposit account to which I am paying Rs 2,000 a month. My recurring deposit is maturing shortly and I will get Rs 4,48,000 against my deposit of Rs 2,40,000. The post office has not deducted any tax at source. Do I have to pay any income-tax on the amount received over and above my deposit amount?

My husband and I are having a joint account in the post office monthly income scheme. For the past five years I am withdrawing the monthly interest and showing the same in my return of income. For this year my husband wishes to withdraw the monthly interest and show the same as income in his return of income. Can he do the same?

I will be undergoing a cataract surgery shortly and the medical expenses will be Rs 65,000. Is such amount of medical expenses eligible for claiming deduction under section 80DDB? K. Sundari

The excess over the principal amount deposited will bear the character of interest and would be taxable. If you are following the mercantile system of accounting in respect of such interest from the RD account, the excess over Rs 2,40,000, i.e. Rs 2,08,000, would be taxable in the current year. As regards the second part of the query relating to interest from the post office monthly scheme, the interest is to be offered by the person to whom the deposit actually belongs. There can be no question of offering it in each year depending on the wishes of the joint account holders. You may note that as a senior citizen the maximum amount not chargeable to tax for the financial year 2008-09 (assessment year 2009-10) is Rs 2,25,000.

The deduction u/s 80DDB can be availed only if the expenditure is on the medical treatment and where the disease or ailment is of the nature specified in Rule 11DD of the Income Tax Rules. Cataract surgery is not one of those treatments for specified diseases or ailments which will qualify qualifying for deduction under this section as it is not provided for in Rule 11DD of the Income-Tax Rules.

As given in a direct tax ready-reckoner, normally days of entry and exit to and from India are considered as stay in India to count 182 days to decide residential status. However, if the cumulative stay is close to 182 days, the hours of entry and departure is taken into account and divided by 24 to count each day. What is the exact reference for the same? As immigration authority does not indicate the hour of entry and exit, whether take-off and landing time certificates given by Air India will serve the purpose for the Income-Tax Department? Anjani Kumar

The date of entry and departure from India will have to be taken into account in determining the period of stay in India. This will be so even if the stay in India on the date of entry or departure was only for a small portion during the day.

Under section 6 of the Income Tax Act it is necessary to do a day count to determine the residential status of an individual. For this purpose while doing the day count, the Authority for Advance Ruling in ABC, In re [1997] 223 ITR 462 (AAR), has held that it is necessary to take into account the date of entry into India and exit from India also for the purpose of the days count. Given this, it will not be necessary to look at the hour of entry or exit from India and therefore the fact that the immigration authority does not indicate the same will not make a difference. The landing certificate of the airlines will also not be required as this would be irrelevant for making the days count to determine the residential status.

Can expenses incurred on residential telephone be reimbursed even if the instrument or connection is in the name of the spouse? Is it necessary that the instrument/connection be in the name of the person availing reimbursement? Delcy David

There can be no bar on an employer reimbursing the residential telephone expenses of an employee where the connection is in the name of the employees spouse. Such reimbursement of telephone expenses would be liable to fringe-benefit tax in the hands of the employer.

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