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How to calculate health/medical insurance policy premium for a multi-year policy

Papinder Singh (Taxpayer) (72 Points)

16 May 2020

Let's assume I bought a 2 year policy for Rs. 60,000 in the last financial year (March 2020), now I am filing ITR-4, what figure should I use for section 80D deduction? Should I split the total policy premium in half?

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11 Replies

Asha Kanta Sharma (Manager - Finance & Accounts) (36365 Points)
Replied 16 May 2020

You can claim the entire amount in one go but do not make any claim again in the 2nd year for the same.

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Papinder Singh (Taxpayer) (72 Points)
Replied 16 May 2020

Does that mean I cannot claim deduction for this policy in the next year? I somewhere read that I can claim deduction on a multi-year policy for multiple years.

Asha Kanta Sharma (Manager - Finance & Accounts) (36365 Points)
Replied 16 May 2020

Since you are paying for Two Years and you will not be paying any premium in the immediate next year so how you will be claiming deduction again ? You need to claim deduction only when you are making payment during the year. If no payment is being made next year how you will claim deduction which you have not incurred during the financial year. Isn't you making payment for two years ?

Papinder Singh (Taxpayer) (72 Points)
Replied 16 May 2020

I found the articles that I mentioned in my first post:

https://www.livemint.com/insurance/news/how-to-claim-tax-benefit-on-premiums-for-multi-year-health-plans-1560074341611.H T M L

https://www.livemint.com/Money/cwW2T22t2BCXUI9qj6vMLN/80D-tax-benefit-for-multiyear-health-plans.H T M L

"The Budget 2018 speech, among the other changes proposed in direct taxes reads, “It is proposed to provide that in a case where premium for health insurance for multiple years has been paid in one year, the deduction shall be allowed proportionately over the years for which the benefit of health insurance is available." Let us try and understand the implications of what is said above."

I want to know if this is still valid, can I just proportionately adjust my health insurance premium?

rama krishnan (12239 Points)
Replied 17 May 2020

@ papinder, yes you are correct... you can claim 80D deductions proportionately

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Papinder Singh (Taxpayer) (72 Points)
Replied 17 May 2020

@ rama krishnan, thank you for confirming, may I ask if you have filed ITR using this method?

rama krishnan (12239 Points)
Replied 17 May 2020

Yes, for a. y. 2019-20,i claimed deduction under 80D proportionately

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Papinder Singh (Taxpayer) (72 Points)
Replied 20 May 2020

@ rama krishnan thank you for reply, according to the first article which I linked to, it is said that "Insurers usually issue a certificate mentioning the amount you can claim each year as deduction", may I ask if your insurer issued any such certificate? and if yes, which insurer you used? I appreciate the info. I am filing for income tax for the first time and I want to make sure I am following the right process...

RAMAKRISHNAN R (INCOME TAX OFFICER) (1736 Points)
Replied 20 May 2020

Pls refer section 80D (4A) .there it has been clearly given how to compute the deduction amount

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Papinder Singh (Taxpayer) (72 Points)
Replied 15 September 2020

Originally posted by : RAMAKRISHNAN R
	Pls refer section 80D (4A) .there it has been clearly given how to compute the deduction amount

Thank you sir ji, the law does mention the case where amount is paid for more than one year, in such cases "a deduction equal to the appropriate fraction of the amount" is permitted, here is the verbatim text from Section 80D (4A):

(4A) Where the amount specified in clause (a) or clause (b) of sub-section (2) or clause (a) of sub-section (3) is paid in lump sum in the previous year to effect or to keep in force an insurance on the health of any person specified therein for more than a year, then, subject to the provisions of this section, there shall be allowed for each of the relevant previous year, a deduction equal to the appropriate fraction of the amount.

Explanation.—For the purposes of this sub-section,—

(i) "appropriate fraction" means the fraction, the numerator of which is one and the denominator of which is the total number of relevant previous years;

(ii) "relevant previous year" means the previous year beginning with the previous year in which such amount is paid and the subsequent previous year or years during which the insurance shall have effect or be in force.

I am happy :)