ASK ANIL: ‘Is money received for mediclaim taxable?’

Anil Rego, CEO, Right Horizons (external link), answers your personal income tax queries.

Vijay Raghavan: Sir, Please advise whether the money received from insurance company on submission of hospital bills under Medical policy liable for tax and does it require to be declared in the return under Income Tax Act? If yes, under what head and as what it has to be declared?

Anil Rego: This money is not taxable, and you need not declare the same during tax filing. This amount neither qualifies as profit nor income. This is just reimbursement of an already incurred expense.

Biswatosh Roy: With due respect and humble submission I like to take your kind suggestions on my query as under:

1. That Sir, through succession we the two surviving brothers likely to get bank deposits and marketable securities of equity like shares and MF of our deceased unmarried younger brother who died recently intestate.

Under the above facts and circumstances please enlighten me whether we will have to pay income tax on the money received through succession and how we will show it in income tax return?

Secondly, please inform how we will receive the money from the bank authority or from the depository participant so as to avoid future complications on income tax return. Thanking you.

Anil Rego: There is no inheritance tax in India on the assets that one inherits. However, when a person dies intestate, the income shall be taxable in the hands of legal representatives (in this case you and your brother) after the date of distribution of the income.

Since the person has passed away without a will, all legal heirs (you and your brother) are entitled to get an equal share of his shares and mutual fund units. For this you will need to submit few documents.

It is a good idea for you to approach the respective financial institution for their process of transmission and you can follow it accordingly.

Praveen Godbole: I shall be grateful if you could kindly arrange for clarification on following query through your tax expert.

My daughter has been NRI for Financial Years 2018-19, 2019-20 and 2020-21.

In current FY, because of pandemic, she was in India for a total of 123 days on ‘Work from Home’ assignment. What will be her residential status for FY 2021-22, considering that her total stay during preceding 4 years (2017-18 to 2020-21) will exceed 365 days?

In 2017-18, she was an ordinary resident while in 2018-19, she was in India for 5 months. Her taxable income in India for current financial year will be less than Rs 3 lakh.

Anil Rego: Your question is a little unclear because you have not given year by year data. Further, I am assuming that you are asking for the status in FY 2022-23.

For a person to qualify as Resident Indian she should stay in India for more than 182 days in a year or she should stay in India for the immediately 4 preceding years is 365 days or more and 60 days or more in the relevant financial year.

Depending on whether one is in India for 60 days or more in the relevant financial year (you have mentioned that her stay exceeded 365 days in 4 previous years), your daughter’s residential status would be that of a Resident Indian or an NRI.

You can find more of Mr Rego’s answers here.

Note: The questions and answers in this advisory are published to help the individual asking the question as well the large number of readers who read the same.

While we value our readers’ requests for privacy and avoid using their actual names along with the question whenever a request is made, we regret that no question will be answered personally on e-mail.

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