Mediclaim insurance is a must-have for all. It safeguards you and your family from afinancial crisis during critical illnesses or accidents. Apart from covering medical expenses, health insurance also offers you access to tax saving schemes. Absence ofMedical insurance can wipe out your savings.
Deduction U/s. 80D of the Income Tax Act, 1961 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 paid by HUF on the health of any members of the family.
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 policyfrom 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 thededuction, the medical insurance policy can be taken in the name of any of the following or jointly in the name of following:
the taxpayer
spouse of the taxpayer
parents :- Parents need not be dependent on the Assessee and parents of spouse are also covered.
Dependent children (i.e. legitimate or legally adopted children) of the taxpayer: - 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.
· HUF(Hindu undivided Family may be resident or non resident) :- In case a HUF is taking thededuction, the medical insurance policy can be taken in the name of any member of the family.
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. 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 Rs. 1,00,000.
6. Partly contribution: If part payment is done by you and part payment by the parent, both can claimdeduction 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.
7. Payment of Mediclaim Premium out of taxable Income:- The amount must have been paid using the taxpayer’s income chargeable to tax.
8. Mode of payment: The premium may be paid by any mode of payment other than cash. Please 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 insurancescheme of General Insurance Corporation approved by the Central Government, or any other insurer approved by the Insurance Regulatory & Development Authority (IRDA).
10. Things You Must Know Before Buying Health Insurance
Buy a basic health insurance plan, which is an indemnity policy that reimburses all the medical costs incurred during hospitalization.
Buying a health insurance policy for you family from the same insurer could entitle you to a discount of up to 10 per cent of your premium.
A basic policy pushing up the sum insured by 5 per cent every year that you do not make a claim. If a claim is raised on your policy, the accrued bonus is reduced by 10 per cent till sum insured is reached.
You could push up basic policy by adding defined benefit plans.
The plans offered by life insurer come with death cover.
If you are relying on the medical benefits given by your employer, then during the period between two job, your policy might suffer a break. Buy having medical Insurance plan on your own keep your insured at all times.
Buy floater plan to cover entire family
Opt for a cashless plan, keep cashless mediclaim cards at hand
Ask insurers for premium rates to find the cheapest policy
Keep an eye on exclusions and inclusions in the policy
Undergo medical tests, if required
Buy health insurance even if you have one from your employer.
11. What is the amount of the deduction?
For Individual
· ·Basic deduction: Mediclaim premium paid for Self, Spouse or dependant children. Maximumdeduction Rs 15,000. In case any of the persons specified above is a senior citizen andMediclaim 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.
For HUF
· 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.
12. Conclusion:- Medical Insurance plans serves a dual purpose. They protect you from financial crisisduring a health emergency or accident and offer you tax saving benefits as well. This encourages people, especially the salaried class to invest in protecting the future of their family while being able to utilise a maximum percentage of their salaries. You are saved from the burden of paying huge medical bills andincome tax, with a health insurance policy in hand.
EXAMPLE- 1
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.
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 a deduction of Rs 13,000/-.
EXAMPLE 2
An individual assessee pays through credit card during the previous year health insurance premium as under:
1. Rs. 12,000 to keep in force an insurance policy on his health and on the health of his wife and children2. 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.
EXAMPLE- 3
Question:- In the last budget, the finance minister announced exemptions for Mediclaim charges paid for senior citizens. However, I am not sure if it has yet been notified and effective. I need to take medical insurance for both my parents, who are senior citizens. I would appreciate if you can let me know.
Answer:- Earlier Sec 80D deduction in respect of medical insurance premium was Rs 15,000 for an individual and Rs 20,000 for a senior citizen. However if someone were to buy medical insurance for his parent/s, an additional deduction of Rs 15,000 (over and above Rs 15,000) will be available. If such parent/s were senior citizen, the additional deduction would be Rs 20,000. So a person insuring himself, his spouse, children and parents could potentially get a deduction of Rs 35,000. This provision is effective from 1.4.08.
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