What section of IT Act covers tax benefits for health insurance policies?

Section 80(D) of IT Act.

Scope

Health Insurance Premium paid for a health insurance scheme provided by any insurer in India that is approved by the Insurance Regulatory & Development Authority (IRDA).

Assessees Allowed Deduction

1. Individuals
2. Hindu Undivided Family (HUF)

Mode of Payment for Health Insurance Premium

Premium must have been paid by any mode other than cash to avail tax benefits.

Who is covered?

• Individual: Premium paid for insuring the health of the individual, spouse, parents and children.
• HUF: Premium paid for insuring the health of any member of the HUF.

Amount of Deduction Allowed

• For non-senior citizens: Amount of health insurance premium paid or Rs. 15,000, whichever is less.
• For senior citizens (any citizen who was 65 years or older during relevant tax year): Amount of health insurance premium paid or Rs. 20,000, whichever is less.

To encourage individual assessees to supplement the efforts of their parents to get medically insured, the government allows an additional deduction of Rs. 15,000 to an assessee, being an individual, on any premium payments made in effect to keep in force an insurance on the health of his/her parent or parents. In this case, the existing condition of dependent with respect to parents is dispensed with. This deduction will be in addition to the existing deduction available to individual assessee for medical insurance on himself/herself, spouse and dependent children. Further, if either of the individual assessee’s parents is a senior citizen and is medically insured, the deduction would be allowed upto Rs. 20,000 or the health insurance premium, whichever is lower.

For example, an individual pays (through any mode other than cash) health insurance premia as under during the previous year:

1. Rs. 12000 to keep in force an insurance policy on his health and the health of his wife and dependent children
2. Rs. 17000 to keep in force an insurance policy on the health of his parents.

He will be allowed a deduction of Rs 27,000 (Rs. 12,000 + Rs. 15,000) if neither of his parents is a senior citizen. If any of his parents is a senior citizen, he will be allowed a deduction of Rs. 29,000 (Rs. 12,000+Rs. 17,000). Whether his parents are dependents or not, is not a consideration for taking this deduction. In other words, you can avail of this deduction on parents’ health insurance premiums paid even if they are not your dependents.

Further, in the above example, if the cost of insurance on the health of parents is Rs. 30,000 out of which Rs. 17000 is paid (by any non-cash mode) by the son and Rs. 13000 by the parent (who is a senior citizen), out of their respective taxable income, the son will get a deduction of Rs. 17000 (in addition to the Rs. 12000 for medical insurance on self and family) and the father will get a deduction of Rs. 13000.

Consult your tax advisor for the exact computation of your deduction for health insurance premiums under section 80D and consequent tax liability when you file your taxes.

If you are looking to buy a health insurance policy in India (also referred to commonly as Mediclaim policy), you must understand the coverage you can get from the policy so that you can compare the different plans. Typical benefits from health insurance or mediclaim policies in India fall under the following categories: 

• Hospitalization Cover or in-patient expenses: Protects the insured person or family (in case of family floater plan) for in-patient hospitalization expenses as a result of suffering illness or bodily injury during the period of insurance, which on the advice of a medical practitioner requires hospitalization. These include room and boarding charges as per policy conditions.
• Day care expenses or out-patient expenses: Day Care expenses incurred on advanced technological surgeries and procedures like Dialysis, Radiotherapy, and Chemotherapy, requiring less than 24 hours of hospitalisation.
• Doctor’s fees, Specialists’ fees, Anaesthetist fees, Surgeon’s fees
• Nursing Expenses
• Cost of Medicines and Drugs: This may include Anesthesia, Blood, Oxygen, Operation Theatre Charges, Surgical Appliances, Medicines and Drugs, Diagnostic Materials and X-ray, Dialysis, Chemotherapy, Radiotherapy, Cost of Pacemaker, Artificial Limbs and Organs and similar expenses.
• Nursing Expenses
• Maternity Expenses: Costs incurred during child-birth are covered under this category. Different limits for coverage are typically applicable for Normal Delivery and Caesarean Delivery. Note that most policies cover maternity expenses only after a waiting period of a few years such as 4 years and 6 years. In other words, a policy holder needs to hold the policy for a certain number of years before the maternity expenses are covered by the health insurance policy.
• Pre-Hospitalization Expenses: Pre-hospitalisation means relevant medical expenses incurred during a period up to certain (typically 30) days prior to hospitalization for an illness or bodily injury sustained and considered a part of a claim admissible under the policy. For example, a person maybe required to undergo certain tests to confirm the disease for which he or she is eventually hospitalized. The Doctor’s consultation fees for this, the expenses on tests and medicines prior to hospitalization for that particular disease fall under the category of Pre-hospitalization expenses. Typically, health insurance policies cover expenses for a certain number of days (most policies cover for 30 days) for Pre-hospitalization.
• Post-Hospitalization Expenses: Post Hospitalisation means relevant medical expenses incurred during a period up to certain (30, 45, 60 etc.) days after hospitalization for an illness or bodily injury sustained and considered a part of a claim admissible under the policy. Follow up consultations with specialists, medicines and test expenses after a person has been hospitalized and discharged fall under the category of Post-hospitalization expenses. Typically, health insurance policies cover expenses for a certain number of days (30, 45, 60 etc.) for Post-hospitalization.
• Emergency Ambulance Expenses: Costs incurred in transporting a insured patient to the hospital subject to limits and other conditions specified in the health insurance policy.
• Daily Cash for accompanying an insured child: If a insured child requires hospitalization, some policies provide daily cash to the accompanying adults.
• Domiciliary Treatment: These are costs incurred for treatment of patients at home. Most insurance policies cover domiciliary treatment if it is based on a doctor’s recommendation and within certain limits set under the health insurance policy.
• Spectacles, Contact Lenses, Hearing Aids: Typically covered only in premium policies.
• Outpatient Dental Treatment: Typically covered only in premium policies and only after a certain waiting period.
• General Health Checkup: Costs incurred for periodic health checkup that is not triggered by any illness. Typically policies cover this for a small (1 or 2%) percentage of the sum assured once every 2 or 3 years. Some of the medical tests covered by this include Medical Examination Report, Blood grouping and Rh Typing, Hb%, Blood Count, Fasting Blood Sugar, ECG and Urine Routine. Check with insurance company for complete coverage details.
• Cashless Hospitalization or Claim: If you have a health insurance policy that supports cashless hospitalization, it means that you can get medical treatment just by displaying your insurance card without paying any cash to the hospital. Most health insurance policies offer this benefit. However, the benefit is restricted to a certain list of hospitals specified by the health insurance company along with its policy. If you visit a hospital in-network (within the list provided by the health insurer), then you do not have to pay any cash for relevant medical expenses. You may still have to pay for expenses that are not covered by the policy rules. However, if you are admitted to a out-of-network hospital, you most likely will have to pay cash for your treatment. Depending on the policy, you may get reimbursed for such treatment by submitting a expense report to the health insurance company or its Third party Administrator (TPA). Cashless hospitalization or claim is a critical element of any health insurance policy.For cashless hospitalization, policies may require the Insured to contact the TPA at least 48 Hours before a planned hospitalization. In an emergency situation, the rules for when the TPA must be intimated may be different.

It must be noted that not all policies provide all of the above benefits. The benefit coverage amounts for each of the above may also vary based on the type of policy you have taken and the company from which you are taking the health insurance policy.