Amendment in section 80D relating to deduction in respect of health insurance premium

[Admin TMI]

Question - What are the proposed amendment in section 80D in Finance Bill 2015 ?

[Admin TMI]

Amendment in section 80D relating to deduction in respect of health insurance premia

The existing provisions contained in section 80D, inter alia, provide for deduction of

a) upto fifteen thousand rupees to an assessee, being an individual in respect of health insurance premia, paid by any mode, other than cash, to effect or to keep in force an insurance on the health of the assessee or his family or any contribution made to the Central Government Health Scheme or any other notified scheme or any payment made on account of preventive health check up of the assessee or his family; and

b) an additional deduction of fifteen thousand rupees is provided to an individual assessee to effect or to keep in force insurance on the health of the parent or parents of the assessee.

A similar deduction is also available to a Hindu undivided family (HUF) in respect of health insurance premia, paid by any mode, other than cash, to effect or to keep in force insurance on the health of any member of the HUF. The section also presently provides for a deduction of twenty thousand rupees in both the cases if the person insured is a senior citizen of sixty years of age or above.

The quantum of deduction allowed under Section 80D to individuals and HUF in respect of premium paid for health insurance had been fixed vide Finance Act, 2008 at ₹ 15000/- and ₹ 20,000/- (for senior citizens). In view of continuous rise in the cost of medical expenditure, it is proposed to amend section 80D so as to raise the limit of deduction from fifteen thousand rupees to twenty five thousand rupees. It is further proposed to raise the limit of deduction for senior citizens from twenty thousand rupees to thirty thousand rupees.

Further, very senior citizens are often unable to get health insurance coverage and are therefore unable to take tax benefit under section 80D. Accordingly, as a welfare measure towards very senior citizens ,it is also proposed to provide that any payment made on account of medical expenditure in respect of a very senior citizen, if no payment has been made to keep in force an insurance on the health of such person, as does not exceed thirty thousand rupees shall be allowed as deduction under section 80D. The aggregate deduction available to any individual in respect of health insurance premia and the medical expenditure incurred would however be limited to thirty thousand rupees. Similarly aggregate deduction for health insurance premia and medical expenditure incurred in respect of parents would be limited to thirty thousand rupees.

Example:

(i)	For Individual and his family Health insurance premia	Rs. 21,000
(ii)	For parents Health insurance of Mother : Medical expenditure on father (very senior citizen) Deduction eligible u/s 80D	18,000 15,000 ₹ 21000 + ₹ 30000 = ₹ 51,000

It is also proposed to define a ‘very senior citizen’ to mean an individual resident in India who is of the age of eighty years or more at any time during the relevant previous year.

These amendments will take effect from the 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years.

AI Summary

Deduction for health insurance premiums expanded; medical expenditure relief added for very senior citizens, aggregate caps maintained. The amendment raises section 80D deduction limits: individual/HUF health insurance premium deduction increased to twenty five thousand rupees, senior citizen deduction increased to thirty thousand rupees. It defines very senior citizen as age eighty or more and allows medical expenditure for very senior citizens (where no premium was paid) as a deduction up to thirty thousand rupees, with aggregate caps of thirty thousand rupees for individuals and for parents. Effective 1 April 2016 for assessment year 2016 17 onwards.