Mukesh Patel.in
practical tax & investment planning online
international tax expert / columnist / author / speaker

TAX SAVING, THE HEALTHY WAY!

Take care of your family’s health insurance & check-up needs & avail useful tax saving deductions u/s. 80D!

Section 80D of the Income-tax Act provides that a taxpayer can claim a deduction up to Rs.15,000 per year in respect of health insurance premium paid by him or any contribution made to the Central Government Health Scheme (CGHS), by any mode other than cash, out of his income chargeable to tax. It needs to be noted that payment of premium, by any mode other than cash viz. cheque, draft or credit card, is one of the important conditions prescribed under Section 80D. 

Deduction under Section 80D, in the case of an individual is allowed for insurance premium paid to keep in force the insurance on the health of the individual himself or on the health of the spouse (i.e., wife or husband) or dependent children. In the case of a Hindu Undivided Family, any sum paid to effect or to keep in force insurance on the health of any member of the family is also allowed as a deduction.

            Where the individual or his spouse or parents, or any member of the HUF is a senior citizen, who is above the age of 60 years, such deduction is allowed to the individual or HUF within an enhanced limit of Rs.20,000.

 ADDITIONAL DEDUCTION FOR PARENTS

Responding to the demand to allow higher deduction in respect of health insurance premium under Section 80D in view of the fact that insurance cover for the elderly comes at a higher price, the Finance Minister announced further reliefs with effect from FY 2008-09.  Accordingly, in addition to the above referred deduction of Rs.15,000 in the case of an individual for covering insurance for his own family, he is additionally entitled to Rs.15,000 (in all Rs.30,000) in respect of premium paid for his parents. This additional deduction can be availed, even where the parents are not dependent on their children who pay such premium.

In case, any of the parents of the individual are senior citizens i.e. above the age of 60 years, he is allowed his own deduction of Rs.15,000 and additionally Rs.20,000 (in all Rs.35,000), in respect of health insurance premium paid under Section 80D.

 RS.5,000 FOR PREVENTIVE HEALTH CHECK-UP

 Under the Finance Act 2012, the scope of Section 80D has been widened to include payments not exceeding Rs.5,000, made on account of preventive health check-up for the taxpayer, his spouse and  dependent children. However, it needs to be noted that this deduction will be available within the existing overall deduction limits of Rs.15,000 or Rs.20,000 (in case of Senior Citizens) prescribed under Section 80D.

            Moreover, any payment not exceeding Rs.5,000, made on account of preventive health check up of parents of the taxpayer, will also be eligible for deduction under Section 80D within the prescribed limit of Rs.15,000 or Rs.20,000 (in case of Senior Citizen Parents). It is pertinent to note that unlike payment of health insurance premium, such payments towards preventive health check-up made in cash, shall also be eligible for deduction under Section 80D.

Case Study-1: Mr. X pays Rs.9,000 as health insurance premium for self, wife and dependent children. Moreover, during FY 2012-13, he incurs expenditure of Rs.7,000 for their preventive health check-up. In this case, Mr. X will be entitled to claim Rs.5,000 (being the maximum prescribed) for preventive health check-up and Rs.9,000 for medical insurance premium, totaling to Rs.14,000, which is within the eligible deduction limit of Rs.15,000 under Section 80D.

Case Study-2: If in the Case Study-1 above, Mr. X has paid health insurance premium of Rs.12,000 and incurred health check-up expenditure of Rs.5,000, he will be entitled to the maximum eligible deduction of Rs.15,000 under Section 80D, against the eligible payments of Rs.17,000 made by him. However, when he or his wife become senior citizens, Mr. X can claim the entire Rs.17,000 (Rs.12,000 + Rs.5,000) as a deduction since the eligible limit in such a case would be Rs.20,000.

Case Study-3:   Mr. M, aged 50 years, has made the following payments during FY 2012-13:

  • Rs.8,000 for health insurance premium of self, wife and dependent children.
  • Rs.6,000 for preventive health check-up of self, wife and dependent children.
  • Rs.17,000 for health insurance premium of his senior citizen parents.
  • Rs.4,000 for preventive health check-up of his senior citizen parents.

             In this case, Mr. M will be eligible for deduction under Section 80D as under:

  • In respect of the payments made for self, wife and dependent children, he shall be entitled to claim deduction of Rs.13,000, representing the eligible payments of Rs.8,000 for medical insurance and Rs.5,000 (maximum available) for health check-up.
  • In respect of the payments made for senior citizen parents, he shall be entitled to claim the maximum deduction available of Rs.20,000, against the eligible payments of Rs.21,000 made by him.

Case Study-4: Mr. P is required to pay premium of Rs.25,000 for health insurance cover of  self, his wife and dependent children and further incur expenditure of Rs.5,000 towards preventive health check-up during the current financial year. In order that he gets the full benefit of deduction under Section 80D, he should plan to pay Rs.10,000 as premium and incur check-up expenditure of Rs.5,000 out of his individual account and arrange to pay the balance Rs.15,000 premium out of his HUF’s account. By splitting the payments in this manner, he should be able to enjoy full benefit of the deduction of Rs.15,000 each available under Section 80D, both in his individual case, as also in the case of his HUF.

Comments are closed.

Powered by Epaperz.com | Hosted at HostADomainNow.com