Here are tax benefits of paying medical insurance premium
Payment of medical insurance premium also entitles an individual to a tax benefit (under Section 80D).
December 10, 2011 / 02:01 PM IST
Arnav Pandya
Payment of medical insurance premium also entitles an individual to a tax benefit (under Section 80D). The tax benefit depends upon the manner in which the premium is paid and the person for whom this is paid so the exact amount of the deduction will need to be calculated after a careful look at the circumstances. There are also certain conditions that need to be met if the deduction is to be available and there is also a maximum limit that has been set for this purpose. Here is a look at these conditions.Income chargeable to taxThe first condition that has to be met for the deduction for medical insurance premium to be eligible is that the contribution has to be made from an income that is chargeable to tax. This makes the source of the premium payment very important. There are two ways in which this condition can be violated and this can deny the tax benefit to the taxpayer. One is that the payment is made from a tax free income. If there is an amount of dividend received that is tax free and the premium payment is made from this amount then the benefit can be denied. The other condition is that the payment might be made from a source that is not income but it could be a capital receipt like a loan. This is the reason why the premium payment has to be done carefully from the right source.Payment in any mode other than cashThere are different ways in which the premium can be paid and this includes cheque, demand draft and various other electronic routes of payment. Now any mode of payment that is used which includes credit cards as well as debit cards or even net banking will be covered for the inclusion of the tax benefit. Only cash as a means of making the insurance premium payment will not be allowed for the tax benefit and this will be the restriction that needs to be tackled.CoverageThere is a specific list of people who will be covered for the tax benefit which means that the premium can be paid for the coverage of these people and the individual making the payment will be allowed the tax benefit. This covers the individual, spouse, parents or dependent children. Premium paid for anyone outside of this list will not be eligible for the tax benefit. The parents may be dependent or not but still they will be covered for the tax benefit while the children might be of any age but the key factor is whether they are dependent or not.AmountThere are different amounts that are available as a deduction for medical insurance premium. The amount paid for an individual, spouse and dependent children is Rs 15,000 with the figure rising to Rs 20,000 if any of the members is a senior citizen. There is a further deduction of Rs 15,000 for the parents of the individual. Here too the figure will rise to Rs 20,000 if anyone of them is a senior citizen. A benefit that individuals will get is that now the age for a senior citizen has been reduced to 60 years from 65 years so it is likely that many more people will qualify for the higher benefit especially parents of the taxpayer. Overall there is a double benefit that is available and hence must be used to the maximum extent. This will ensure that adequate medical insurance cover is available and at the same time there is a tax benefit that comes along with the process.Arnav Pandya can be reached at arnavpandya@hotmail.com Discover the latest business news, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
