Medical insurance plan or a health insurance plan of general insurance company works on the principle of reimbursement of your hospitalization expenses. If you invested in any of such policy then you can claim income tax deduction under section 80D of income tax act, 1961.
This deduction is allowed only to an individual (resident / non resident/ Indian citizen/ foreign citizen) or a Hindu undivided family (resident/ non resident).
Which payments qualify for deduction under Section 80D?
Payment is made towards premium for mediclaim policy.
Note that medical insurance policy refers to mediclaim policies (where you submit bills and get re-imbursement). Fixed benefit policies like personal accident and critical illness policies do not qualify for this deduction.
Also note that from financial year 2013-14 onwards, in case of the individual taxpayer, following payment also qualifies for the deduction:
•Payment made to the Central Government Health Scheme, and
•Preventive health check-up will also qualify towards this deduction.
Can the premium be paid in cash?
For medical insurance premium, you have to pay by a mode other than cash (e.g. credit card, cheque, net banking etc.). If you pay by cash, deduction under Section 80D is not allowed.
However, payment on account of preventive health check-up can be made by any mode (including cash).
The deductions one can get under Section 80D are:
Individual can make payment for wife or husband or dependent children and deduction shall be allowed equal to the amount paid but subject to a maximum of Rs 15,000 but in case of senior citizen deduction shall be allowed upto Rs. 20,000.
If the individual has taken policy in the name of parents (dependent or independent), additional deduction shall be allowed to the extent of the premium paid but maximum Rs15,000, however, if the policy has been taken in the name of senior citizen, deduction shall be allowed to the extent of Rs20,000.
Deduction for preventive health check up shall be maximum Rs5,000 in aggregate. For self, spouse, dependent children and parents.
Hindu undivided family can take the policy in the name of any of its member and deduction shall be allowed in the similar manner.
Definition of senior citizen as per Income Tax Act
Senior citizen means is a resident individual and whose age at any time during the year should be at least 60 years.
No one can claim deduction under Section 80D for mediclaim premium payment for my in-laws. You can only claim for parents.
One can submit bills for preventive check-up test reports in excess of Rs. 5,000 to his/her employer and claim it under “medical reimbursement”.
Deduction under Section 80D is available on “payment basis” and can claim whatever payment have made in the same year itself, though it may relate to future years. So for advance premium claim under section 80D is available.
Additional Points To Have In Mind While Claiming Deduction For Medical Insurance Premium Under Section 80D.
• You can claim deduction for you payment irrespective of your residential status i.e. any individual being a resident or non resident can claim this deduction.
• If you are not an Indian citizen (i.e. a foreign citizen) then you also can claim benefit of paying your medical insurance your medical insurance premium under section 80D of income tax act.
• The insurer to whom you are making this payment should be an approved insurer (i.e. should have been approved by Insurance Regulatory and Development Authority).
• The premium amount should have been paid in any mode other than cash. If it is paid by cash then the premium paid will not be eligible for income tax deduction under section 80D of income tax act.
• Senior citizen means one who is a resident in India and who is at least of 60 years of age at any time during the previous year.