Payment of premium on life insurance policy and health insurance policy not only gives insurance cover to a taxpayer but also offers certain tax benefits. In last year's budget, the Tax Benefit on health insurance premium was enhanced to Rs 50,000 from Rs 25,000 under Section 80D. This means that an individual can claim a tax deduction of up to Rs 25,000 a year for the medical insurance premiums paid for self, spouse and children along with an additinal Rs 25,000 for premium paid for parents. In case the age of parents is more than 60 years, the deduction limit goes up to Rs 30,000.
Additionally, the benefit for senior citizens has also been enhanced from Rs 30,000 per annum to Rs 50,000 per annum. “The section 80D of allows a deduction of up to Rs 25,000 and in case of senior citizens an additional deduction of up to Rs 30,000 is allowed by Income Tax,” Harshvardhan Roongta, CFP, Roongta Securities, told Zee Business Online.
Apart from this, Section 80C provides deduction in respect to various items like a life insurance premium, investment in Public Provident Fund, investment in NSC, repayment of the principal component of housing loan, investment in Post Office Time Deposit Scheme, Senior Citizens Saving Scheme, etc.
Out of the above mentioned schemes that fall under Section 80C, a taxpayer, being an individual or a Hindu Undivided Family (HUF), can claim deduction in respect of premium on life insurance policy paid by him or her during the year.
Deduction Allowed:
Overall deduction u/s 80C (along with deduction u/s 80CCC & 80CCD) allowed is up to Rs. 1,50,000.
Restriction on amount of deduction with respect to capital sum assured:
Deduction is restricted to 20% of the capital sum assured in respect of policies issued on or before 31-3-2012 and 10% in case of policies issued on or after 1-4-2012. In case of policy taken on or after 1-4-2013 in the name of any person suffering from a disability or severe disability referred to in section 80U or suffering from disease or ailment as given in section 80DDB, the limit will be 15% of capital sum assured.
The Income Tax Department of India says, as per section 80D, an individual or a HUF can claim a deduction in respect of the following payments:
a. Medical insurance premium paid by an assessee, being individual/HUF by any mode other than cash.
b. Any contribution made by assessee, being individual to Central Government Health Scheme or such other Scheme as may be notified by the Central Government.
c. Sum paid by assessee, being individual on account of preventive health check-up.
d. Medical expenditure incurred by assessee, being individual/HUF on the health of a senior citizen person provided that no amount has been paid to effect or to keep in force an insurance on the health of such person.
Policy to be taken or expenditure to be incurred in whose name?
In case of an individual, deduction is available in respect to medical insurance policy taken in his own name, or in the name his/her spouse, his/her parents and his/her dependent children. In case of HUF, the policy can be taken on the health of any member of such HUF. Deduction on account of medical expenditure shall be allowed only when it is incurred on the health of the aforementioned persons who are senior citizens.
'Senior citizen' means an individual resident in India who is of the age of sixty years or more at any time during the relevant previous year.