Fixed medical allowance ia not exempted from tax

I am a pensionee and senior citizen. Apart from drawing a pension (along with DA), every month, I also get Rs 300 as Fixed Medical Allowance (FMA). My pension banker is recovering TDS on FMA also.

On my representation that FMA as pre-facto medical reimbursement should not be taxed, the branch told me that their head office had clarified — “FMA is part of gross pension and cannot be covered for exemption upto Rs 15,000” I understand that allowan-ces for personal expenses like transport allowance in respect of serving employees are exempt from income-tax. Please clarify.

Via E-mail, C.V. Ramaniah

Reimbursement by employer of actual expenditure incurred by an employee for medical treatment in respect of the employee, or any his family members, not exceeding Rs 15,000 in the FY is not treated as a perquisite and therefore not taxable. However, Fixed Medical Allowance (FMA) will not be covered under the above exemption and will be taxable.

Transport allowance gran-ted to an employee to meet his expenditure for the purpose of commuting bet-ween the place of his residence and the place of his duty is exempt to the extent of Rs 800 per month.

Any allowance granted to an employee working in any transport system to meet his personal expenses during his duty performed in the course of running of such transport from one place to another place is exempt to the extent of 70 per cent of such allowance or Rs 6000 per month whichever is less.

Further, any allowance granted and spent to meet the cost of — travel on tour or on transfer and conveyance allowance granted to meet the expenditure incurred on conveyance in the performance of the duties, provided free conveyance is not provided by the employer will be exempt to the extent spent or specified as per income-tax rules.

I have purchased a house in Chennai on my mother’s name by taking a loan of Rs 12 lakh at the rate of ten per cent per annum from my relatives. Currently I am paying Rs 10,000 as interest every month. When I informed my company, they said that unless the house is purchased on my name, the interest payable on the house loan could not be deducted under section 80C. Please clarify if my company’s stand is correct and is there any provision available for me to deduct home loan interest despite the house being registered in my mother’s name?

K.Rakesh Kumar, Via E-mail

You have purchased the property out of your own funds in your mother’s name. Therefore, any income arising out of such property shall be taxed in your name. Similarly, the eligible deductions towards interest and re-payment of loan can be claimed by you.

If the property is self-occupied, interest on housing loan can be claimed subject to a ceiling of Rs 1,50,000 This is allowable U/s 24 and not Section 80C. Any amount paid towards the re-payment of principal shall be eligible for deduction U/s 80C, subject however to the overall limit of Rs 1,00,000 lakh provided under the said section.

Kamal Rathi is a chartered accountant, representing Rathi & Malani, a Hyderabadbased
accounting firm. Readers can mail their queries on income tax to kamalrathi.ca@gmail.com [1]