Article discusses Expenses incurred by An Assessee for his Sibling for which he can claim Tax Benefit under Income Tax Act, 1961 and includes Tax Benefit in respect of Leave Travel Assistance (LTA), Interest on education loan, Medical expenses incurred for medical treatment of siblings with disability and Exemption of gifts received.

Sibling relationships…outlast marriages, survive the death of parents, resurface after quarrels that would sink any friendship. They flourish in a thousand incarnations of closeness and distance, warmth, loyalty and distrust.

Erica E. Goode

The above quote succinctly brings out the nature and importance of relationship we enjoy with our siblings in our life. Like life our tax laws also recognise the importance of siblings and grant you some tax benefits in respect of certain transactions. However there are certain expenses/transactions  which do not get such tax benefits. Let us discuss both the aspect of the law.

Tax benefits available

Leave Travel Assistance (LTA)

All the 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 your place of your working provided your employer pays you the LTA or Leave Travel concession (LTC) subject to satisfaction of certain conditions. The exemption is available in respect of travel undertaken with India for two journeys undertaken during a block period of four calendar years only. The current block of four year has just begun and 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.

Exemption of gifts received

Generally all the gifts received by you in a year become fully taxable in case the aggregate value of the gifts exceed fifty thousands rupees.  However certain gifts are still tax exempt in your hand even if the value exceed fifty thousand rupees. The exemptions include any asset received on inheritance or under a will on death of executor of the 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. In definition of relatives from who the gifts received are fully exempt,  your siblings are included so you can strengthen your ties with your siblings by giving them gifts without calling undue attention of the taxman.

Medical expenses incurred for medical treatment of siblings with disability

One more place where the lawmakers have recognised the relationship of siblings is in respect of expenses incurred for upkeep and maintenance  of  your sibling/s who suffer from disability. In such a situation you are allowed a deduction of seventy five thousand rupees 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 any premium to any life insurance company for a scheme of maintenance of such disabled persons. You can claim a higher expenses of one lakhs  twenty five thousands rupees, in case your sibling is suffering from severe disability.  This deduction can be claimed irrespective of the quantum of amount spend by you.

Interest on education loan

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. However in case you are appointed a legal guardian of the sibling for whom the education loan is taken you can still claim this deduction.

Tax benefits not available

While the list of transactions where the importance of sibling relationship is recognised is very small,  there are many provisions where the law lawmakers have shut their eyes.  There may arise situation in real life where an elder sibling may have to treat his younger siblings as his own child and bear expenses for younger sibling/s in respect  of education, medical treatment etc.. The law should provide for the benefits in respect of such expenses, also,  incurred by elder sibling for younger sibling/s. Section 80 C does not allow any deduction for tuition fee for your sibling or for life insurance premium paid on life of your younger siblings which is available if the same are paid for your child. Likewise for medical insurance premium also you get a deduction under Section 80 D if the premium is paid for your children but it is not available if paid for your sibling/s.

From the above discussion it becomes evident that the 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.

Balwant Jain is a tax and investment expert. He can be reached on [email protected], @jainbalwant

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June 2021