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Mint
3 days ago
- Business
- Mint
Will money crowdfunded from relatives, friends to pay medical bills be taxed?
Any amount received without consideration from a relative would not be taxable and is specifically exempt under section 56(2)(x) of the Income Tax Act, 1961. In respect of your mother, amounts received from her brother would be considered as those received from a relative and would, therefore, not be taxable. In your case, the amount received from your maternal grandmother, as well as the wife of your mother's brother, would also be considered as received from relatives and would therefore not be taxable. In respect of the amounts received from your friends and your mother's friends, these could be considered as taxable in your hands as they are not received from relatives. While one could have taken a view that amount received with a clear condition for spending for a particular purpose should not constitute income in the hands of the receiver, a recent ITAT decision has held that such crowdfunded amount received is taxable in the hands of the recipient under section 56(2)(x). The ITAT decision was primarily based on the fact that there was a mixing of the funds raised from crowdfunding with personal funds, and that the funds were not fully utilised for the purpose for which they were raised. Accordingly, if you have received the funds in a separate bank account, which is then used to incur the hospital and rehabilitation expenditure, or if you can clearly substantiate the link between the funds received and the amounts incurred, you may be able to distinguish your case from the facts in this ITAT case. It may be possible to argue that the funds were received for spending for a specific purpose, were spent for that purpose, and that you were merely a channel for paying the funds on behalf of the contributors. Alternatively, one can also consider claiming a deduction for the hospital expenses incurred out of the amounts received, on the ground that incurring these expenses was the condition for receiving the crowdfunding amounts. However, the matter is highly debatable. Therefore, it would be necessary for you to maintain documents to substantiate that the amounts were received with the obligation to spend on hospitalisation and rehabilitation. Mahesh Nayak, chartered accountant, CNK & Associates.
Mint
25-05-2025
- Business
- Mint
What tax benefits are available for parents of autistic children?
My son is autistic and his UDID card mentions 25% disability. What tax benefits am I eligible for? Is it true that the clubbing provision doesn't apply to special children? Also, how can I set up a trust for his future? - Name withheld on request. Since your son is diagnosed with autism, you are entitled to claim a fixed deduction of ₹ 75,000 per year under Section 80DD of the Income Tax Act. This deduction covers expenses related to medical treatment (including nursing), training, and rehabilitation of a dependent with a disability. Importantly, in the case of autism, the 40% disability threshold does not apply to claim this deduction. You will, however, need a valid medical certificate issued by a neurologist or a civil surgeon/chief medical officer at a government hospital, which must be filed using Form 10IA before filing your income tax return. If your son's condition is classified as a severe disability (more than 80%), the deduction increases to ₹ 125,000 per year. As for your second query, yes, you are correct—the clubbing provisions under the Income Tax Act do not apply in the case of a minor child with a disability as defined under Section 80U. Since autism is included in this definition, any income your son earns will not be clubbed with your income. This provides a significant financial planning advantage. Regarding estate planning, you can consider creating a special needs trust for your son's future. This can be done either: During your lifetime (an inter vivos trust), or Through your will (a testamentary trust, which takes effect after your passing). The trust deed should clearly outline the purpose of the trust, the appointed trustee(s), and how the funds are to be managed and utilised for your son's care. As long as the trust is set up specifically for the benefit of a dependent with a disability, any property or funds received by the trust will be exempt from tax. The most critical part of this process is identifying a trustworthy and capable trustee who can ensure your child's well-being and financial security over the long term. Mahesh Nayak, chartered accountant, CNK & Associates. If you have any personal finance query, write to us at mintmoney@ to get it answered by experts.
Mint
18-05-2025
- Business
- Mint
Ex gratia I got at the time of layoff was taxed. Can I get refund?
The taxability of the ex gratia received by you from your former employer would depend on the exact nature of the payment and the circumstances under which such payment is made. It would be taxable as salary if it was paid to you in connection with your services rendered during employment or in connection with the termination of your employment. If the ex gratia is paid voluntarily by the employer, say in appreciation of any personal qualities of the employee, such payment would not be taxable as salary. While various courts have held that such voluntary payment of ex gratia without any legal obligation and not in lieu of services rendered by the employee would be considered as a capital receipt and, therefore, not taxable, most of these decisions were before the introduction of section 56(2)(x). In my view, if such ex gratia is received voluntarily from a former employer, such amount would likely be taxable as income from other sources under section 56(2)(x) as it is received without any consideration. If you wish to claim that the amount received is not taxable, you can claim a refund of the TDS deducted by your employer in your return of income. You would need to ensure that the amount of ex gratia received by you has been disclosed in the return as exempt income, and such a disclosure is also made in the schedule for TDS. However, as discussed above, such a view is unlikely to succeed as it may be taxable as income from other sources. It is assumed that the entire amount of ex gratia received by you is voluntary and is not towards gratuity or under any voluntary retirement scheme as the taxability under each of these is different and may be exempt, subject to certain conditions as well as a threshold. Mahesh Nayak, chartered accountant, CNK & Associates. If you have a personal finance query, write to us at mintmoney@ to get it answered from experts
