Income tax laws allow you various benefits in respect of amounts spent or invested. Primarily these tax benefits are available for amounts spent or invested on yourself but for certain items, the benefits are available for amounts invested or spent on family members. Let us discuss.

Benefits available for parents

Section 80D allows you an exclusive deduction of Rs. 25,000/- paid for health insurance premium for your parents whether financially dependent or no. In case they have completed 60 years of age, the deduction available goes to Rs.  30,000/- in a year (this amount has been increased to Rs 50,000 from A.Y 2019-20). Within this limit of Rs. 25,000/-, the law allows you a deduction of Rs. 5,000/- per year for amounts spent on preventive health check up. Please note that the law does not allow you any deduction in respect of life insurance premium for your parents even if they are dependent.

Deductions is also available under Section 80DD for expenses incurred on medical treatment of your dependent parents with specified physical disability or for buying a life insurance policy for maintenance of such dependent parents. The deduction available is up to Rs. 75,000 and goes up to Rs. 1,25,000 in case the parent is suffering from severe disabilities. This deduction can also be claimed for siblings, children, or spouse in case they are suffering with such disease. In addition to above deduction a further deduction under Section 80DDB is also allowed upto Rs. 40,000 for expenses incurred for treatment of any of the family persons including your parents suffering from some acute specified diseases. However this deduction goes up to Rs. 60,000 ( this amount has been increased to Rs 1,00,000 from A.Y 2019-20) in case the expenses incurred is in respect of a patient who is a senior citizen. Moreover if the patient is super senior citizen the maximum amount of deduction shall be Rs 80,000 for A.Y 2016-17 to 2018-19 and Rs 1,00,000 from A.Y 2019-20.

Any reimbursement received up to Rs. 15,000 from your employer for medical expenditure incurred on your parents, siblings, spouse, yourself and children  is also exempt. This exemption is eligible only up to financial year 2017-18.

The income tax laws also allow you the tax benefit in respect of LTA (Leave Travel Assistance) received from your employer and spent by for your financially dependent parents toward travel expenses incurred on holidays with you in India.

Benefits available for Siblings

The benefits of LTA and deduction under Section 80DD and 80DDB is also available for your siblings, children, and spouse  who are financially dependent on you.  The law does not envisage any tax benefits for your siblings under Section 80C be it insurance premium or school fee or even any investment. Even the benefit of interest on education loan is not available in respect of your siblings.

Benefits available for Spouse

You can claim tax benefits in respect of LTA for your travel with your spouse anywhere in India even if the spouse is financially independent. In case the spouse is also in receipt of LTA, the couple can claim it for holidaying every year as both of you can claim this in alternate year. You can also claim the tax benefits in respect of medical insurance premium paid for yourself as well as your children up to Rs. 25,000/-.

You can also take the tax benefits for life insurance premium paid for your spouse as well as for any amount deposited in the PPF account for your spouse. You can avail the tax benefits in respect of interest paid on education for higher studies of your spouse in addition to yourself and your children.

Benefits for Children

For your children you can claim various tax benefits. You can claim the benefits for life insurance premium paid on the life of your children whether dependent or not but for claiming the benefits for medical insurance premium within the overall limit of Rs. 25,000/- your children should be financially dependent on you. You can also claim the benefits for school fee as well as for interest on education loan. The benefit of contribution to Public Provident Fund account of your children can be claimed even if they are independent.

Please note that the benefits of National Saving Certificates and Equity Linked Saving certificates are available only to the tax payer and not anyone else.

From the above discussion, it is clear that the legislators have not provided for the tax benefits consistently for expenses incurred in respect of your family members.

Author is tax and investment expert and can be reached at @jainbalwant

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(Republished with amendments)

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January 2021