Posted on September - 23 - 2010
We are a family – IT doesn’t really think so!
“Fri are the siblings, God never gave us.” Mencius
Undoubtedly the above quote speaks volumes about the importance of siblings (brothers & sisters) in our lives. Without them any family unit is incomplete. Traditionally Indians are very protective and concerned about their siblings and instances are there where elder brothers and sisters have made great sacrifices for their siblings. Unfortunately this scenario is very feebly recognized by Income Tax laws in India. Since direct tax code bill is introduced in Parliament and is intended to take effect from 1st April 2012, I thought of brining out the paradox in the existing provisions of Income Tax with regard to siblings.
Firstly the deduction is not available in respect of life insurance premium paid on the life of siblings of the assessed, but only in respect of life of the assessed himself, his wife and children. Taking the case of education, the deduction is available for tuition fee paid only for any two children of the assessed and not the siblings of the assessee. Though in Indian conditions many elder siblings educate their younger siblings besides taking care in many other respects. In addition to tuition fee, any allowance received from one’s employer, as children education allowance or hostel allowance is exempt up to certain limits, which is not extended for siblings. Talking of education loan here, the present income tax provisions allow deduction for interest paid on education loan taken for higher education of yourself, your spouse or your children and not your siblings.
Not only this, the present provisions of Income Tax Act discriminate when it comes to buying health insurance for the siblings, the tax benefits is not extended if health insurance is purchased for any of your siblings. However the provisions allow you deduction of an aggregate of Rs. 35,000 if you buy a health insurance for yourself, spouse, your children and your parents who have completed more than 65 years of age.
This becomes all the more desirable where parents have retired from the active earning life or are no longer alive to support the child and the responsibility to support them falls on the elder siblings. It is important to become fair to such siblings who shoulder the responsibilities left by their parents.
Now I would bring to the light the provisions where Income Tax Act (1961), recognizes the importance of siblings and rewards them for being there in the time of need.
Leave Travel Expenses: The Income tax Act, allows an exemption in respect of expenses incurred for traveling to any place in India out of the leave travel assistance received by you from your employer. The journey to be undertaken needs to be either on your holidays or on retirement. You can claim this exemption two times in a block of four years. The persons in respect of whom you can claim this exemption include brothers and sisters in addition to parents, children and spouse provided they all are dependent on you.
* Expenses incurred for medical treatment of dependent sibling: The deductions is available in respect of expenses incurred by you on medical treatment of the dependent brother or sister with specified physical disability. This is also extended in respect of expenses incurred for medical treatment, training and rehabilitation of the sibling with special needs. Deduction is also allowed for securing a life insurance policy purchased for maintenance of such dependent sibling. The allowable deduction normally is up to Rs. 50,000 and goes up to Rs. 1, 00,000 in case such dependent is suffering from severe disability. This deduction also can also be claimed for parents, children, or spouse in case they are suffering with such disease.
* In addition to above deduction a further deduction is also allowed upto Rs. 40,000 for expenses incurred for treatment of any of the family persons including your siblings suffering from some acute specified diseases. However this deduction goes up to Rs. 60,000 in case the expenses incurred is in respect of a patient who is a senior citizen.
* Likewise the present provisions grants you an exemption from tax on any payment made by your employer for treatment in government hospital, or in other recognized hospitals for treatment of specified disease of yourself, your spouse, your parents, children and siblings. Any reimbursement received up to Rs. 15,000 from your employer for medical expenditure incurred on the above category of the relatives is also exempt. This limit is proposed to be raised to Rs. 50,000 under the proposed Direct Tax Code bill introduced in the parliament.
From the above discussion, it is clear that the legislators have not provided for the tax benefits consistently for expenses incurred in respect of the brothers and sisters. However the income tax laws recognize the dependence of sibling for the purpose of medical treatment and meeting traveling expenses. Hence if a sibling is dependent on you for the purpose of medical treatment, he is equally dependent on you for the purpose of buying medical insurance or his regular education expenses requirements. Therefore the law should provide for tax benefits for expenses incurred in respect of tuition expenses, interest on education loan taken, and cost of medical insurance of the sibling also. In the light of above I request the taxmen to bring the provisions in harmony for all the expenses particularly with regards to siblings who are integral part of large Indian family.
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