Just like in real life, our tax laws also recognise the importance of relationship of siblings and grant us some tax benefits in respect of certain transactions. However, there are certain expenses/transactions that do not get such benefits. Let us discuss both aspects of the law.
Tax benefits available: Following are the tax benefits that are available for siblings under the Income Tax Act:
All employees will not be able to claim the benefit of conveyance allowance in respect of local travelling from current year, however, they can still claim full tax benefits in respect of expenses incurred on travelling outside the place of working, provided the employer pays the LTA or Leave Travel concession (LTC) subject to satisfaction of certain conditions.
The exemption is available in respect of travel undertaken within India, for two journeys during a block period of four calendar years. The current block of four years is for 2018-2021. In addition to your children, spouse and parents, you can also claim this benefit in respect of expenses incurred for any of your siblings, provided they are wholly or mainly dependent on you financially.
Generally all gifts received by you in a year become fully taxable in case the aggregate value of the gifts exceeds Rs 50,000. However, certain gifts are still tax exempt in your hand even if the value exceeds Rs 50,000 in a year. The exemptions include any asset received on inheritance as per the personal law in case no will is made or those received under a will.
Likewise, gifts received at the occasion of marriage are also fully tax free in your hands. While exempting the gifts, the law makers have given due recognition to the tradition of gifting among close relatives. The definition of relatives, from whom gifts received are fully exempt, includes siblings. This means you can give your siblings gifts without calling undue attention of the taxman.
Another area where lawmakers have recognised the relationship of siblings is in respect of expenses incurred for upkeep and maintenance of sibling/s who suffer from disability. In such a situation you are allowed a deduction of Rs 75,000, in a year, if you spend any money for medical treatment, rehabilitation, training of any of your sibling/s. The deduction can also be claimed if you have paid life insurance premium for a scheme of maintenance of such disabled persons like Jeevan Vishwas Endowment Assurance and Jeevan Adhar Whole Life Insurance policies of Life Insurance Corporation of India.
You can claim a higher expense of Rs 1,25,000, in case your sibling is suffering from severe disability. The word disability and severe disabilities are those are defined under “Persons with disabilities (Equal opportunities, protection of rights and full participation Act 1995” and as certified by the specialist medical professional. . This deduction can be claimed irrespective of the quantum of money spent by you.
You can claim tax benefits of interest paid on education loan taken from specified financial institutions or charitable organisation for education of yourself, your spouse or your children. Even if you are appointed a legal guardian of sibling for whom the education loan is taken, you can still claim this deduction.
There are many provisions where the law lawmakers have not provided tax benefits to taxpayers who may incur expenses for their siblings. Section 80 C does not allow any deduction for tuition fee for your sibling or for life insurance premium paid on life of your siblings, which is available if the same are paid for your child. Likewise, for medical insurance premium, deduction under Section 80 D, is not available if paid for your sibling’s.
Law makers have partly done justice to the important relationship of sibling by providing benefits in respect of certain transaction and not more equally deserving transactions.
The writer is a tax and investment expert