I am 75 years old. This year I bought a Bima Nivesh policy for Rs. 50,000 in the name of my daughter as I was not eligible to buy the same in my name. My daughter is married but does file a return of her own. My question is, can I claim the relief under Section 88 or does she claim the relief? I was told by the agent that I could claim it even though my daughter is married, but my CA says I can't claim. Please clarify.

Mr. Raman Mehra, New Delhi.

As per the provisions of Section 88 of the Income Tax Act, any sum paid by an individual as Life Insurance Premium on the life of the individual himself, his/her spouse and any child of such individual shall be eligible to get rebate. The children may be married/unmarried, dependant/not dependant on the individual. So in view of the above provision, you are eligible to get rebate under section 88 on premium paid by you on the policy taken in your daughter's name.

Could you explain the changes made in the current budget in taxation of dividends and why there was such a rush to pay interim dividend?

Dheeraj Pathak, Calcutta

Presently, Indian companies have to pay dividend distribution tax at 10.20% (including surcharge) on dividend paid by them, but there is no further taxation in the hands of the shareholder. But the Finance Bill 2002 proposes a change whereby the company will not deduct and the shareholder pay taxes at the normal rates whatever it may be according to his/her income. It also proposes to reintroduce section 80M to avoid taxation of dividend income of a company to the extent of dividend distributed by it. These changes may enable payment of inter-corporate dividends without payment of any tax by a corporate shareholder, but will be taxable in the hands of individual shareholders. The proposed changes shall come into effect from April 1, 2002. Therefore, companies are rushing to declare and pay interim dividend by March 31, 2002 and restrict the tax incidence on dividends to 10 per cent only.

I was an employee of private sector and not covered by payment of Gratuity Act, 1972. I retired on 1st January 2002 and received Rs. 4,00,000 as gratuity. I want to know what amount of gratuity will be exempt from tax?

Sachin Gupta, Agra

As per the provision of the Income Tax Act, any gratuity received by an employee on retirement in case of private sector employee not covered by Payment of Gratuity Act is exempt from tax to the extent of least of the following:
(1) Rs. 3,50,000
(2) Half month's salary for each completed year of service
(3) Gratuity actually received

For above computation, while calculating completed years, any fraction of the year will be ignored and salary means average monthly salary of 10 months immediately preceding the month in which the person retires. So, you shall be entitled to claim exemption as given above. In absence of sufficient information, we are not able to calculate the exempt amount of gratuity.

We are 5 brothers and 2 sisters, all are married. Our father expired in December 2000 and mother in August 2001. In December 2001 the self-acquired property of my father in Delhi D.D.A. Colony was mutated in my name. If I dispose off this property, the proceeds realised will be distributed equally amongst all the brothers and sisters. Do we have to pay any Capital Gain Tax, if so, how? Please give advice.

Shashi Choudhary, Jaipur

As per the provisions contained under reaction 49(1) of the Income Tax Act where the property is acquired by succession, inheritance, devolution, gift or under will, the cost of acquisition in such cases shall be taken as cost of acquisition to the previous owner.
So, if you dispose off the property you will be liable to pay the Capital Gain Tax, if any arises on account of the sale.

If you have any investment or tax related questions, send in your queries to:
The Editor, Bajaj Capital Investors India,
Bajaj House, 97 Nehru Place.
New Delhi-110019.