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.

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