Souparnika, a finance professional, works for an MNC in Pune. Her parents who stay in Bengaluru, were diagnosed with COVID and hospitalised. After retirement, her father had not taken any medical insurance. And hence the hospital bills had to be paid out of his savings, which left a huge hole in his pocket. Souparnika felt that she should take a policy for her parents which would keep them covered financially in such uncertain circumstances.
With respect to claiming the amount paid towards Mediclaim policy for her parents as a deduction under the Income Tax Act, Souparnika has the below doubts :
a. Her parents are not dependant on her. Is parent’s “dependency” on the assessee a pre-condition to claim deduction?
b. The Mediclaim policy for her parents is in addition to the policy that she has taken for herself, husband and children. Is there a restriction to claim deduction for the Mediclaim policy for parents if she claims for herself?
COVID-19 has taught us many valuable lessons and one vital lesson that most of us learnt is the “importance of a health insurance”, especially in case of senior citizens.
Many top Companies ensure that their employees are covered with a Mediclaim policy. Hence a lot of the COVID affected “employed” category did not feel the brunt while meeting the hospital bills. The most affected category were the senior citizens. Post retirement, many senior citizens do not get a health insurance policy. This group was the most affected during COVID-19. Many fell critically ill and became physically weak post COVID. The huge hospital bills that was staring at them were like “adding salt to wound”.
Like Souparnika, many of us understood that we should not take this lightly anymore and decided to go for a health insurance for parents. It is good to know the restrictions if any while claiming this as a deduction in the Income Tax return, if we decide to do so.
Sec 80D of the Income Tax Act 1961, allows an assessee (Individual/HUF) to claim deduction of the amount paid towards health insurance of self and family. Family here refers to spouse and “dependent” children.
The section further allows the assessee to claim amount paid towards health insurance of parents. The section is silent on the “dependency” criteria in case of parents. Hence Souparnika can claim the amount paid towards health insurance of her parents as a deduction u/s 80D while filing her Income Tax Returns.
The cap that is specified in the Income Tax Act 1961, is separate for self (and family) and parents. Hence Souparnika is entitled to claim the amounts paid towards health insurance for her family and her parents (within the limits specified).
How can we help you?
Various clauses from the Income Tax Act may be simplified in online contents. But most of the time, it requires professional help in identifying suitable route for specific instances. Similar to nurturing and taking care of personal health, it is important to also keep a tab on one’s financial health. We at Chockalingam Unnamalai & Associates, can help you understand the pros and cons of various choices you make in the context of personal taxation. You can bank on us for a stress free tax filing and related compliances.
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