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How to avail benefits for NPS contributions done by your employer on behalf of you? Answers to your personal finance queries

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Q. I am a State government employee. I deposited ₹1.50 lakh in my PPF account. The department is deducting ₹72,000 towards my NPS account. (This is the mandatory 10% basic + DA deduction). Can I claim a deduction of ₹50,000 u/s 80CCD(1B) on behalf of this NPS saving? I have not made any other voluntary deposit in this account.

A. Amounts contributed by your employer towards NPS are covered under 80CCD(1) and 80CCD(2) towards employee and employer contributions, respectively. Any voluntary contribution towards NPS shall only be covered under 80CCD(1B), thus the additional ₹50,000 benefit prescribed cannot be claimed by you under 80CCD(1B) as no voluntary contribution has been done.

However, benefits can be availed for NPS contributions under 80CCD(1) and 80CCD(2) done by your employer on behalf of you and your employer in the following manner.

80CCD(1) limits are clubbed with 80CCE limits and as you have exhausted the same through your contribution towards PPF (under 80C), you will not be eligible for any claim over and above ₹1.50 lakh. With respect to 80CCD(2), you may claim a maximum deduction of 10% of basic plus DA (for non-central government employees) and the same is outside the purview of ₹1.50 lakh (80CCE) and ₹50,000 (80CCD(1B)). You may take the break-up of the ₹72,000 from your employer and claim the deduction based on the explanations provided above.

Q. My daughter has received some amount from the sale of unlisted shares owned by her. She already owns a residential flat. She has held the shares for more than two years. Can she buy another residential property or 54EC bond to claim tax exemption?

A. As the unlisted shares were held for over 2 years, they are long-term capital assets. She is eligible for exemption under section 54F as she owns only one residential property as on the date of sale of the unlisted shares and exemption under section 54EC will also apply to her provided the investment is made within 6 months of date of sale.

Q. My daughter (married) is studying DNB (post graduation after MBBS) in a private hospital. This course is conducted by the National Board of Diploma of G0I. This is a 3- year course. She is paying ₹1.25 lakh as tuition fee annually.

She is also getting ₹50,000 as monthly stipend. In 2019-20 PY, she received ₹5 lakh in stipend. The hospital authorities are deducting I-T monthly.

1) I want to know whether the stipend income is taxable?

2) lf so, can the ‘ tuition fee’ be deducted from gross income?

3) As source deduction of tax has already been made, she is bound to file returns. If the stipend is not taxable, how can this income be shown in the returns?

4) If the tuition fee cannot be shown as deduction in her return, can the same be done in my return?

A. 1. Stipend received by doctors pursuing higher education from private hospitals is a taxable income and considered as emoluments towards performing duties like a full-time doctor while gaining experience and is not perceived as monies received towards scholarship for education. Only amounts received towards scholarship is exempt under tax. Income tax is to be paid in accordance with slab rates applicable for individuals.

2. No, deductions for payment of tuition fee is not allowed from stipend income as this tuition fee paid is not connected with the earning of the stipend.

3. If the hospital is providing Form 16, the same is to be declared under “Income from Salaries”, if provided with Form 16A, the same is to be declared under “Income from Other Sources” or “income from business or profession” under applicable ITR.

4. Deduction towards tuition fee paid for two children can be claimed by the parent if the fee is paid to a registered university, school or an education institution based in India for full-time education courses under Section 80C. In your case, as your daughter is paying the fee herself, you cannot claim any deduction in this regard;

(The author is partner, GSS & Associates, Chartered Accountants, Chennai)

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