When one talks about medical or health insurance, many prospective policy takers believe that they are sufficiently covered by their organisation and / or by their children’s place of employment. However, with spiralling cost of healthcare, one has to understand that a health insurance cover of few lakhs is not enough for medical emergencies. Besides payment / reimbursement of hospital bills and income tax benefits, a usual health or medical insurance policy covers many more costs such as attendant allowance; expenses related to treatment at home, daily hospital cash allowance etc.
Income tax deduction available under the following sections:
Deduction under Section 80 D – Medical insurance premium:
This is the first basic section under which deduction is available for individual resident assesses. They can claim deduction from taxable income for a maximum of Rs. 25,000 – Rs. 60,000 depending upon whether the insurance premium is paid for self or parents who may or may not be senior citizens.
Features of a health insurance cover under Section 80 D
Party covered: In case of a resident individual Indian citizen claiming deduction for medical insurance, premium paid should be for the taxpayer himself and / or the spouse and or the children and / or the parents (whether dependent or not). In case of a Hindu Undivided Family (HUF) it could be any member of the HUF.
Coverage of Children: Children below 3 months and children above the age of 18, if employed are not considered for deduction u/s 80 D. Married girl child is also not considered for deduction under this section. However, a male child is covered upto the age of 25 if he is a bonafide regular student and fully dependent upon his parents.
Sum Insured: The minimum sum insured should be Rs. 50,000 and then in multiples of Rs. 25,000 and onwards. The maximum cover to be allowed varies from company to company. However one particular Health Insurance company offers cover upto
र 1.00 Crore. Sum insured should be identical for the primary insured and its dependents. However children can be covered for 50% of the sum insured.
Part payment: In case of part payment by the tax payer by self, spouse, children, brother, sister and parents, the deduction can be claimed by all of them proportionately, to the extent of their individual contribution.
Deduction under Section 80 DD – Premium paid for medical disability of a dependent family member:
Deduction is available for insurance premium paid by assesses for maintenance of the medically disabled dependent family member.
- The dependent family member under Section 80 DD should be wholly /mainly dependent:
- In case of individual assesses: Spouse, children, sisters, brother and parents
- In case of HUF: Any member of a HUF
- Approved disability mentioned under Section 80 DD would include
- Mental Retardation
- Loco Motor disability
- Leprosy – cure
- Hearing impairment
- Low vision
- If the assesses claims deduction under Section 80 DD and such dependent disabled dies and assesses receives any sum from insurance company, such amount would be taxable in the hands of the recipient as per income tax slab of the year.
Points to be remembered for claiming income tax deduction for premium paid
- In-laws are not included for deduction under Section 80D & under Section 80 DD
- To claim tax deduction one has to present a receipt of payment of premium.
- Premium should be paid by cheque or demand draft or credit card or fund transfer. Premium paid in cash cannot be used to avail income tax deduction.
- Premium paid for a critical illness rider or medical insurance rider in a life insurance policy is also eligible for deduction under Section 80D.
Apart from reimbursement of hospitalisation expenses or cashless hospitalisation, day care procedures and taxation benefit, the health insurance policy provides many such benefits that are lesser know to the common man.
Very senior citizen: Individuals above the age of 80 are defined as ‘very senior citizen’ in the Income tax act. As they are unable to take health insurance and therefore unable to take tax benefit under Section 80 D, the Union Budget 2015 announced that medical expenses incurred by the ‘very senior citizen’ himself or by the assesses should be allowed as deduction under Section 80 D to the maximum of Rs. 30,000. However if such citizen has a health insurance then no such seduction is allowed.
Preventive health check up: The government has granted a limit of Rs. 5,000 within the limit of Rs. 25,000 and Rs. 30,000 for non senior and senior citizen respectively for undergoing preventive heath check up. For example: You are 35 years old and you pay Rs. 21,000 for health insurance of your spouse and children and you incur Rs. 6,000 as preventive health check up expenses; however you shall be allowed Rs. 25,000 as deduction under Section 80 D. As the years advance lifestyle illness is on the rise, therefore, it is important to get a check up done once a year. Many hospitals have a package for preventive health check up.
Daily cash allowance for hospitalisation: Apart from reimbursing the hospital bills / directly paying for hospital expenses there are many such expenses incurred such as food, refreshment, daily commuting by the family members to the hospital. Many insurance policy pay a fixed sum of money per day of hospitalisation irrespective of the fact that bills are produced for the same or not.
Alternative treatment: Other than the modern medical science i.e. allopathic way to treat illness there are other forms of treatment such as Homeopathy, Unani, Ayurveda etc. form treatment that is preferred by some to the allopath style. There are some insurance covers in the marketplace which offer to reimburse certain percentage of such expenses incurred.
Domiciliary hospitalisation: Everybody knows that to avail the benefit of health insurance policy one has to be admitted in the hospital. However it’s a little know fact that domiciliary treatment i.e. treatment at home under the advice of a doctor is also reimbursed if the patient is unable to go to the hospital or if there are no beds vacant in the hospital.
Recovery expenses: Apart from hospitalisation expenses many insurance policies also provide recuperating / convalescence benefit in case of prolonged hospitalisation. The term prolonged is defined differently by various insurance companies. Usually the number of days of hospitalisation to avail the benefit of this clause should be 7 to 10 days. This is a lumpsum amount paid to the patient for recovery post hospitalisation.
Organ donation expenses: In case of a transplantation surgery this clause takes care of the expenses incurred by the organ donor to donate. The expenses reimbursed are the cost of surgery or the expenses incurred in harvesting the organ. In case of transplantation of kidney, liver, lungs, heart etc. this clause helps in slashing down the cost to a large extent. However this clause does not include expenses incurred in screening the organ.
Attendant Allowance: If a child aged 12 or less is hospitalised, then a fixed sum is paid by the insurance company for the adult who is accompanying the child at the hospital each day after the 3rd day of hospitalisation to a maximum of 10 days. However the specifics might differ with each insurance company, the crust of the product remains.
Critical illness allowance: Usually all policies cover expensive procedures in critical illness such as dialysis and chemotherapy; however certain product offer higher sum assured limit for critical illness and there are others which hand over a pre defined sum on diagnoses of the same.
Health insurance in India has not penetrated to the extent of life insurance. According to government data tabled in Parliament in May 2016, only 18% of the urban population is covered by any medical insurance. In rural areas, the figure is at 8%. The absence of part payment in medical insurance is cited as one of the reasons for under penetration of medical insurance in India.
Its often noticed that people start investing in life insurance and other tax saving instruments from December to March i.e. when they have to submit proof of investment to their employer. It’s said that one should not invest for the purpose of saving tax; however investment should be done for the sole purpose of accumulation of wealth. Life insurance is usually misconstrued as an investment instrument. Insurance of any kind whether it’s life or health should be done for the purpose of peace of mind and to protect one against any calamity. Heath insurance premium payment not only buys your family health cover but also assist in saving tax. With rising healthcare expenses it’s advisable to take a medical cover for self and the family.