Deduction in respect of Medical Insurance Premium (Mediclaim) paid to keep in force insurance by individual either on his own health or on the health of spouse, dependent parents and children or HUF on the health of any members of the family. A Mediclaim policy is a must because should you fall sick or meet with an accident, your medical bills could wipe out your savings.
Features of Mediclaim policy
1. Premium based on Age: - As in term insurance, the premium rates will vary among the insurers and will also depend on your age. The older you are, the heftier the premium. For instance, Mediclaim policy from General Insurance Corporation has a fixed premium till 35 years and then it changes in 10-year slabs.
2. Who is it available to?
- Individual (resident or non resident, Indian Citizen or foreign citizen):- In case an individual is taking the deduction, the medical insurance policy can be taken in the name of any of the following: the taxpayer or the spouse, parents or dependent children* of the taxpayer.
- HUF(Hindu undivided Family may be resident or non resident) :- In case a HUF is taking the deduction, the medical insurance policy can be taken in the name of any member of the family.
- Dependent Children (i.e. legitimate or legally adopted children). Children above 18 years, if employed, can not be covered. Male children, if not employed, but a bonafide student can be covered upto age of 25 years. Female children, if not employed, can be covered until the time she is married.
- parents need bot be dependent on the Assessee.
- parents of Individual or Spouse both are covered.
3. Entry Age: This insurance is available to a person between the age of 18 to 59 years. However, the Policy can be renewed upto the age of 80 years.
a) Children above the age of 3 months can be covered provided parents are covered concurrently and suitable premium is paid. If the child above 18 years is employed or if the girl child is married, he or she shall cease to be covered under the policy. However male child can be covered upto the age of 25 years if he is a bonafide regular student and fully dependent on primary insured. Female child can be covered upto the time, she is unmarried.
b) If the insured has taken continuous Mediclaim insurance policy with us for at least 5 years prior to attaining the age of 80 years the policy can be renewed beyond the age of 80 upto the age of 90 years as a special case with the approval of Regional Incharge on case to case basis. The premium chargeable shall be 10% of the premium for 75-80 years age slabs for proposers above 85 and 20% of the premium for 75-80 age slabs for proposers above 90.
c) No inclusion of family member during currency of policy is permissible except for a new born child between the ages of 3 months to 6 months and newly married spouse within 60 days of marriage. Otherwise inclusion of family member shall be allowed only at the time of renewal. Prorata premium shall be charged for such inclusion during the currency of the policy for the unexpired period.
4. Sum Insured: Minimum sum insured shall be Rs 50,000/- and can be increased in multiples of Rs 25,000/-upto Rs 5 lacs. The sum insured must be identical for primary insured and the dependents. However, the children may be covered for 50% Sum Insured as per 4 above.
5. Payment of Mediclaim Premium out of taxable Income:- The amount must have been paid using the taxpayer’s income chargeable to tax.
6. In addition to deduction u/s, 80C, 80CC and 80CCD,:- This is an additional deduction available which do not include deduction u/s 80C, 80CCC and 80CCD for which overall limit is is Rs. 1,00,000.
7. Partly contribution: If part payment is done by you and part payment by the parent, both can claim deduction to the extent of their contribution subject to maximum allowed but amount should be paid directly to insurance company and paid through mode other than by cash.
8. Mode of payment: The premium may be paid by any mode of payment other than cash. Note prior to 1st April 2009, premium payment was required to be done only by cheque. Credit card or other online payment mechanism where not allowed. Now all payment modes except cash payment are accepted.
9. Which Mediclaim Premium is allowed? : - Mediclaim premium paid under Medical insurance scheme of General Insurance Corporation approved by the Central Government, or any other insurer approved by the Insurance Regulatory & Development Authority (IRDA).
10. What is the amount of the deduction?
- Basic deduction: Mediclaim premium paid for Self, Spouse or dependant children. Maximum deduction Rs 15,000. In case any of the persons specified above is a senior citizen (i.e. 65 years or more as of end of the year) and Mediclaim Insurance premium is paid for such senior citizen, deduction amount is enhanced to Rs. 20,000.
- Additional deduction: Mediclaim premium paid for parents. Maximum deduction Rs 15,000. In case any of the parents covered by the Mediclaim policy is a senior citizen, deduction amount is enhanced to Rs. 20,000.
- Mediclaim premium paid for any member of the HUF. Maximum deduction Rs 15,000. In case any member of the HUF covered by the Mediclaim policy is a senior citizen, deduction amount is enhanced to Rs. 20,000.
Senior citizen: means who is at least of 65 year of age or more at any time during the previous year.
1. An individual assessee pays (through any mode other than cash) during the previous year medical insurance premia, out of his taxable income, as under:
(i) Rs 12,000/- to keep in force an insurance policy on his health and on the health of his wife and dependent children;
(ii) Rs 17,000/- to keep in force an insurance policy on the health of his parents.
Under the new provisions 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. However, 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 the parents are dependent or not, is not a consideration for deciding the deduction under the new provisions.
Further, in the above example, if cost of insurance on the health of the parents is Rs 30,000/-, out of which Rs 17,000/- is paid (by any non-cash mode) by the son and Rs 13,000/- by the father ( who is a senior citizen), out of their respective taxable income, the son will get a deduction of Rs 17,000/- ( in addition to the deduction of Rs 12,000/- for the medical insurance on self and family) and the father will get adeduction of Rs 13,000/-.
An individual assessee pays through credit card during the previous year health insurance premium as under:
- Rs. 12,000 to keep in force an insurance policy on his health and on the health of his wife and children
- Rs. 17,000 to keep in force an insurance policy on the health of his parents.
Under the proposed new provisions, 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. However, 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 the parents are dependent or not, is not a consideration for deciding the deduction under Section 80D.
Appendix: Section 80D of the Income Tax Act
Deduction in respect of medical insurance premium.
80D. (1) In computing the total income of an assessee, being an individual or a Hindu undivided family, there shall be deducted such sum, as specified in sub-section (2) or sub-section (3), payment of which is made by any mode, other than cash, in the previous year out of his income chargeable to tax.
(2) Where the assessee is an individual, the sum referred to in sub-section (1) shall be the aggregate of the following, namely:
(a) the whole of the amount paid to effect or to keep in force an insurance on the health of the assessee or his family as does not exceed in the aggregate fifteen thousand rupees; and
(b) the whole of the amount paid to effect or to keep in force an insurance on the health of the parent or parents of the assessee as does not exceed in the aggregate fifteen thousand rupees.
Explanation.For the purposes of clause (a), family means the spouse and dependant children of the assessee.
(3) Where the assessee is a Hindu undivided family, the sum referred to in sub-section (1) shall be the whole of the amount paid to effect or to keep in force an insurance on the health of any member of that Hindu undivided family as does not exceed in the aggregate fifteen thousand rupees.
(4) Where the sum specified in clause (a) or clause (b) of sub-section (2) or in sub-section (3) is paid to effect or keep in force an insurance on the health of any person specified therein, and who is a senior citizen, the provisions of this section shall have effect as if for the words fifteen thousand rupees, the words twenty thousand rupees had been substituted.
Explanation.For the purposes of this sub-section, senior citizen means an individual resident in India who is of the age of sixty-five years or more at any time during the relevant previous year.
(5) The insurance referred to in this section shall be in accordance with a scheme made in this behalf by
(a) the General Insurance Corporation of India formed under section 9 of the General Insurance Business (Nationalisation) Act, 1972 (57 of 1972) and approved by the Central Government in this behalf; or
(b) any other insurer and approved by the Insurance Regulatory and Development Authority established under sub-section (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999).]