Dedcution u/s 80 DD of Rs 50000 fully exempted or limited to actual expenses ?

Friends,

There is a provision under Income Tax Act for a deduction of Rs. 50000/- for the expenditure made on the treatment of  a dependent under Section 80 D. Here a question arises whether Deduction u/s 80 D can be claimed of Rs 50000. A.O says deduction shall be allowed only for expense for which I show proof .Is he right?

In my view , the action of A.O is not according to the provision of the Section 80DD of the I T ACT. Even a rupee you spend on dependent person for his medical treatment and maintenance , you are allowed a deduction of Rs 50000.

Section 80DD states :

“Where an assessee, being an individual or a Hindu undivided family, who is a resident in India, has, during the previous year,

(a) incurred any expenditure for the medical treatment (including nursing), training and rehabilitation of a dependant, being a person with disability; or

(b) paid or deposited any amount under a scheme framed in this behalf by the Life Insurance Corporation or any other insurer or the Administrator or the specified company subject to the conditions specified in sub-section (2) and approved by the Board in this behalf for the maintenance of a dependant, being a person with disability,

the assessee shall, in accordance with and subject to the provisions of this section, be allowed a deduction of a sum of fifty thousand rupees from his gross total income in respect of the previous year:”

Thus there is no provision in the I T Act that the claim of deuction u/s80 DD shall be subject to limitation to the extent of actual payment.

Compare it with the section 80DDB which also gives reliefs to the assessee for expense on his dependents suffering from Specific diseses . In that Section deduction is subject to limitation . Read the excerpts below :

“Where an assessee who is resident in India has, during the previous year, actually paid any amount for the medical treatment of such disease or ailment as may be specified in the rules made in this behalf by the Board

(a) for himself or a dependant, in case the assessee is an individual; or

(b) for any member of a Hindu undivided family, in case the assessee is a Hindu undivided family,

the assessee shall be allowed a deduction of the amount actually paid or a sum of forty thousand rupees, whichever is less, in respect of that previous year in which such amount was actually paid“

You make an appliaction to the A.O stating that there is no such provision and that not giving relief of Rs 50000 even if you spend Rs 100 on the dependents , shall be illegal. You will definitely win your case before appellate authorities.

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Going for Medical Insurance (Section 80 D) - Must Read This

Friends,

If you have planned to take medical insurance policy here are some FAQ's regarding this which everyone would like to know. 

Hello, My question is regarding the Deduction under section 80D for Premium paid on Medical Insurance. I work for an IT company, and the company has a tie up with a health insurance company to provide coverage for me, wife and kids, the premium for which is paid by the company. But I have taken additional coverage for my parents, for which the premium is paid by me, from my salary. Can this premium amount be considered for deduction under Section 80D ? What are the documents required to submit for this, while filing the tax return. AAshish K , Banglore

Can the employee claim 80D deduction on the Group mediclaim policy premium by the employer and the employee’s premium deducted from his salary?Has the position changed after the amendment in 80D whereby the necessary condition of payment by cheque has been waived off.Manish Kumar Joshi

I am an Individual Paying Mediclaim of Rs 17,000/- for my spouse and myself and Rs20,000/- for my dependent mother who is a senior citizen . I would Like to know what would be the eligible amount of decuction U/s 80D i.e whether it would be a ) Rs 15,000/- ( for my spouse and myself ) + 20,000/- for my mother OR b ) only 15,000 /- OR c ) only Rs 20,000/- . Kindly advise .Jagdish Shah

1.Why is deduction u/s 80D allowed?

The deduction is allowed for

1. buying medical insurance , popularly known as Mediclaim policy.
2. Keeping in effect a medical insurance already bought.

2. How much deduction available?

1. If Mediclaim is bought for any person other than person having 65 years , then Rs 15,000.
2. If Mediclaim is for person having 65 years or more , Rs 20,000.

3. Who can claim deduction?

Individual and HUF making payments for medical insurance.

1. Individual can claim for self, wife, children and parents.
2. HUf can claim for Mediclaim policy on members.

4. What should be mode of payment of insurance premium? 

Any mode other than cash will make one eligible for deduction u/s 80D.

5. If office deducts salary for medical insurance for employee and his family , whether the employee can claim deduction u/s 80D?
Yes, for the fact that the mode of payment is any ,other than cash, and It is employee who paid for himself or his family’s insurance.

Get a certificate from the employer regarding deduction of amount for medical insurance purpose.You can claim to the extent the deduction has been made by the employer for medical insurance subject to maximum RS 15,000

6.If an individual buys Mediclaim for himself and for his parents exceeding 65 years, how much can he claim as deduction?
Good question. Subsection 2 of section provides as under

(2) Where the assessee is an individual, the sum referred to in sub-section (1) shall be the aggregate of the following, namely:

(a) the whole of the amount paid to effect or to keep in force an insurance on the health of the assessee or his family as does not exceed in the aggregate fifteen thousand rupees; and
(b) the whole of the amount paid to effect or to keep in force an insurance on the health of the parent or parents of the assessee as does not exceed in the aggregate fifteen thousand rupees.

It is clear that an individual can claim deduction up to Rs 35,000 for medicalim insurance , if he makes insurance for his family and any parents exceeding 65 years.

7. Can somebody having invested the amount from income exempt from tax or by taking loan , claim deduction u/s 80 D?
No as per opening line in the section 80D , the payment should be only out of income chargeable to tax . Read the opening line :

80D. (1) In computing the total income of an assessee, being an individual or a Hindu undivided family, there shall be deducted such sum, as specified in sub-section (2) or sub-section (3), payment of which is made by any mode, other than cash, in the previous year out of his income chargeable to tax.

8. Can you get deduction u/s 80D for Overseas Mediclaim policy? 

Yes, in author opinion , there in nothing in the provision u/s 80D which prohibits claim of deduction u/s 80D for medical insurance for overseas journey. The only requirement, as given in section 80D(5) is that the insurance companies issuing such overseas insurance should be one of these

(5) The insurance referred to in this section shall be in accordance with a scheme made in this behalf by
(a) the General Insurance Corporation of India formed under section 9 of the General Insurance Business (Nationalisation) Act, 1972 (57 of 1972) and approved by the Central Government in this behalf; or
(b) any other insurer and approved by the Insurance Regulatory and Development Authority established under sub-section (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999).

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Additional deduction U/s 80D for health insurance premium

Friends,

(Must Read This)

If you have done your maximum Savings u/s 80C of Income Tax of Rs. 1 Lac, You can avail additional deduction u/s 80D for health Insurance.  Deduction under section 80D is available for medical claim policy By individual for family and HUF for their members . Other details regarding 80D and medical insurance there under is given below

1. Addition to section 80 C:Section 80D is available other than 100000 deduction available under 80C for life insurance,ppf,gpf,tuition fee,ULIP,House loan repayment etc.
2. Insurer covered:This deduction is available for medical claim policy which should be framed in this behalf by

• by GIC(General insurance Corporation) or by
• any other insurer but approved by IRDA(Insurance Regulatory Development authority)
3. Available to :Deduction is available to Individual (resident or non resident ,Indian Citizen or foreign citizen) , HUF(Hindu undivided Family may be resident or non resident)

4. Mode of payment:Insurance Premium should be paid by any mode other than by Cash .Means if insurance premium is paid by cash then no deduction is available.Before Assessment year 2008-09 ,only payment by cheque was allowed under this section but from Ay  2008-09 onwards the deduction is allowed by other mode also like online payment which is now a days is very popular or by credit card is also allowed.
5. Out of Income :The amount should be paid out of the income chargeable to tax.
6. Proposer of the policy is not must:The premium is to be paid to effect or keep inforce insurance policy  ,there is no condition that assessee should be the proposer of the policy ,
7. Partly contribution: Assessee can  partly contribute the premium amount but amount should be paid directly to insurance company and paid through mode other than by cash (see example)
8. Insurance cover on?:First deduction given below :Insurance Premium may be paid for medical claim insurance policy for assessee himself or spouse or dependent children or any combination of three.
9. Addition for parents:Second deduction given below:Insurance premium may be paid for medical claim insurance for assessee parents (father or mother or for both)
10. Deduction upto 40000:Theoretically ,maximum deduction can be claimed for Rs 40000.(detail as given below)
    

Amount Of deduction  : Two type of Deductions are available to Individuals under this section from  Assessment year 2009-10

1. Deduction on Medical insurance premium paid for himself,spouse,dependent children =Rs 15000 maximum.
2. Deduction on Medical insurance premium paid for parents ,whether dependent on assesee or not =Rs 15000 maximum

Deduction to HUF: Deduction to HUF is available on insurance premium paid for policy taken for  of any member of the  HUF

Addition deduction for Resident Senior Citizen:In addition to two point above,  additional deduction of Rs 5000 is available where assessee or his spouse (wife or husband) or dependent parents or any member of the family in case one and father or mother is a resident in India and a senior  citizen in case two.And same in the case of HUF assessee if policy  has been taken on member which is senior citizen than additional Rs 5000/- deduction is available also to HUF.

Senior citizen means who is at least of 65 year of age or more at any time during the previous year.

Example : An individual assessee pays (through any mode other than by cash) during the previous year medical insurance premium as under

1. Rs 12000/- to keep in force an insurance policy on his health and on his wife and dependent children
2. Rs 17000/- to keep in force an insurance policy on the health of his parents.

According to above provisions he will be allowed of Rs 27000/-(12000/- +15000/-) if neither of his parents is senior citizen .however if any of his parent is a resident senior citizen ,he will be allowed a deduction of 29000(12000+17000) .whether the parents is dependent or not is not a consideration for deciding the deduction under section 80D(from assessment year 2009-10 )(previous year 2008-09)

Further, in the above example ,if cost of insurance on the health of the parents is 30000/- out of which Rs 17000/- is paid (by any non cash mode) by the son and rs 13000/- by the father (who is senior citizen), out of their respective taxable income ,the son get the deduction of Rs 17000/- (in addition to deduction of Rs 12000/- for the medical insurance on self and family) and the father will get deduction under section Rs 13000/-
(Example as given in Finance Act 2008)

Hope it will be now easy to understand the section 80D deduction.