This article explains how medical insurance is tax deductible under Section 80D of the IT Act
With increasing medical costs, mediclaim policies are a good option to hedge medical costs. Mediclaim policies are offered by almost all insurance companies - both in the private sector and the public sector. These policies provide insurance cover for the treatment of most of the ailments and hospitalisation. In addition to the basic coverage, add-ons are available on payment of extra premium. You should go through the coverage and exclusions clauses carefully.
In some cases, pre-existing ailments are also covered on payment of additional premium. The cover may be enhanced to ailments which are not normally covered also. Some insurance companies provide cover for day care and annual medical check-ups as well.
Mediclaim insurance is a good investment avenue offering tax savings and medial cover. You can insure against medical expenses for yourself or for your dependents. Mediclaim cover provides security to meet unanticipated medical expenditures.
The premium paid for mediclaim policies is tax deductible. Under the Income Tax Act, exemption is available on the amount contributed towards medical insurance premium. This is provided under Section 80D of the Income Tax Act. According to these provisions, premium paid towards mediclaim insurance can be deducted from the total income of an assessee. The deduction is available only to individuals and Hindu Undivided Family members.
In case of an individual, the amount deductible includes any sum paid to effect or keep in force an insurance policy on the health of the assessee, spouse, dependent parents and dependent children. The dependence of parents will have to be proved by the assessee in order to claim the exemption. Dependence will be evident in case the resources of the parents are not sufficient to support them.
In case of a Hindu Undivided Family, the amount deductible includes any sum paid to effect or keep in force an insurance policy on the health of any member of the family.
In order to claim this deduction, the amount should be paid by cheque. Further, the amount should be paid in the relevant previous year. It should be paid out of income chargeable to tax. The insurance policy should be approved by the General Insurance Corporation of India. Also, the insurance should be in accordance with a scheme framed and approved by the central government.
The limit has been enhanced with effect from the year 2007. The deduction on medical insurance premium under Section 80D has been increased to a maximum of Rs 15,000. In the case of a senior citizen, the maximum amount is Rs 20,000. Previously, till March 31, 2007, the lower of these amounts was eligible for deduction - if the sum does not exceed Rs 10,000, the whole sum, and, in any other case, Rs 10,000.
However, now, enhanced deductions are available. A point to be kept in mind is the new changes with respect to insurance claims. Insurance companies have set limits on the amount of claim eligible for different types of medical treatments. These also vary depending on the city where the premium has been paid and where the treatment has been taken.
