Tax Benefits For Disabilities

I have a child who is mentally challenged. Does the government provide me some relief under the Income tax laws? 

- M. Mehta

Under the Income Tax Act, 1961, you will be entitled to the following benefits, depending on the severity of the disability of the dependent person:

• As your child is suffering from a disability of the nature specified in Section 80U of the said Act, the provisions of Section 64(1A) in respect of clubbing of income of a minor child will not be applicable. Hence, his/her income will not be clubbed with that of his/her parent.
• Under Section 80DD, deductions of the expenses incurred for the maintenance or on medical treatment of the disabled dependent person, if s/he is having severe disability then you will be entitled to claim deduction of up to Rs 100000, and if it is not a severe disability then a deduction of Rs 50000. The deduction can be availed of the full amount irrespective of actual expenses incurred for the purpose.
• Under Section 80U, your child can avail the deduction from his/her taxable income, depending on the severity of his/her disability. If the disability is more than 80 per cent then the deduction is to the extent of Rs 100000. If the disability is more than 40 per cent, then the deduction will be restricted to Rs 50000 and if disability is less than 40 per cent, then no deduction can be availed under this section.

We have a private company, with me and my friend, both as shareholders and directors. The company has a commercial property in its name. However, we now propose to hold the property in the individual names, rather than the company. How do I transfer the said property to our names without inviting capital gains tax?

- Dhriti W

Under Section 46, where the assets of a company are distributed to its shareholders on its liquidation, such distribution shall not be regarded as a transfer by the company and hence the capital gains tax of the company on transfer of such property to the shareholders will not be attracted. However, the distribution of the assets should be in kind. It may be noted that the shareholders will have to pay capital gains tax on the shares on winding up, taking into account the market value of the property. The specifics have to be worked out and then only could one take a decision in regard to the option.  

For the ensuing year ended March 31, 2014, I am expecting a salary income of Rs 600000 and interest income of Rs 18000. I have also incurred a loss on trading in futures of about Rs 300000. My employer company has refused to take into account the loss and has deducted tax on my salary income. Will I get refund of income tax in case I file my return of income taking into account the loss I incurred?

- Pankaj Talekar

Your company has rightly refused to consider the loss you have incurred in futures trading as the employer is empowered to consider only specified deductions and losses while deducting tax at source as per the provisions of the Income Tax Act, 1961 and rules made thereunder. 

Under Section 71 (2A) of the said Act, any loss under the head – Income from Profits and Gains from Business or Profession cannot be set off against income from salaries. Thus, even if you file your return, you will not be entitled to get refund of tax as set off of the loss is not permitted and hence your tax liability will not be reduced.

However, it is advised that you ought to file the return of income within the prescribed time limit, presumably on or before July 31, 2014, failing which you will not be able to carry forward the said loss and set it off in future against business income.