Amendment in section 80D relating to deduction in respect of health insurance premium

 

The quantum of deduction under Section 80D in respect of health insurance premium paid is proposed to be enhanced. You can refer a detailed article about Health Insurance posted in our blog Deduction U/S 80D for payment of medical insurance premium In this article, we will focus on the amendments done in the Union Budget 2015

 

Who all are covered?

  • Self (say, husband)
  • Spouse (say, wife)
  • Dependent children (say, minors/majors’ not earning any income)
  • Parents (whether dependent or not)

 

Scenario # 1: Insurance is done to cover the health of the husband, wife and dependent children and if no one is above 60 years, then the total permissible deduction towards the actual premium paid can be taken upto Rs.25,000.

 

Suppose, one of them is over 60 years, (say, husband is 60 years, then instead of Rs.25,000, upto Rs.30,000 can be claimed)

 

Scenario # 2 : Apart from the insurance of the husband, wife, dependent children, if the health of parents are covered and if one of the parents is above 60 years, then the total permissible deduction towards the actual premium paid can be taken up to Rs.30,000. This is in addition to what is mentioned in Scenario # 1.

 

Scenario # 3: Suppose, at least one of the members (parents) is over 80 years and if no health insurance premium is paid, then Rs.30,000 can be taken as deduction from the total taxable income. (This is the new provision introduced during this year’s budget – very senior citizens are often unable to get health insurance coverage and are therefore unable to take tax benefit under section 80D and hence this deduction is proposed)

Example: Suppose Mr. Ramesh (50 years), his wife Ms. Sumana (45 years), his kids, Mr. Akshara (20 years), Ms.Amrutha (17 years) and Mr.Gangadhar, the father of Mr. Ramesh (aged about 75 years) are covered under health insurance. The total premium paid is Rs.57,000 per year. How much can he claim as tax deduction?

  • Ramesh, his wife and kids Rs.25,000 (because none of them are above 60 years); PLUS
  • Towards the heath of Gangadhar, Rs.30,000. Hence a total of Rs.55,000 can be claimed as tax deduction.

 

A good amount of deduction is available towards premium paid on health insurance. Generally, the premiums have also gone northwards, so this enhancement makes sense. Secondly, this will also encourage people to take more insurance cover.

 

These amendments will take effect from the 1st April, 2015 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years.

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About B E Kumar Prasad

B E Kumar Prasad
He is a Practicing Chartered Accountant in Bengaluru, India. He has 25+ years of experience in income tax, business setup, and NRI matters. He is also an Insolvency Professional and Registered Valuer (F&SA).Prasad welcomes your comments and questions. Please email him at [email protected]

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