No deduction towards health insurance if premium is paid in Cash


No deduction

Query 1]

I wish to gift some cash amount out of my pensionary benefit to my children. My queries are:

  1. Is it mandatory to execute it on stamp paper?
  2. Are there any restrictions on the number of occasions to execute gift deed? 
    Please reply. []


All over, Gift is not only a tool of tax planning but also a symbol of love & affection. It gives happiness to the donor as well as donee. The pleasure widens further when one comes to know the fact that this love is tax free. Gift received by an individual from a relative is not subject to tax. Relative here doesn’t include the relatives as meant in common parlance but includes only the following person:

(i)        spouse of the individual;
(ii)       brother or sister of the individual;
(iii)     brother or sister of the spouse of the individual;
(iv)     brother or sister of either of the parents of the individual;
(v)       any lineal ascendant or descendant of the individual;
(vi)     any lineal ascendant or descendant of the spouse of the individual;
(vii)    spouse of the person referred to in clauses (ii) to (vi).
In your specific case,

  1. For the purpose of Income Tax Act, it is not at all mandatory to make the gift of moveable property by executing the gift deed on a stamp paper. Even gift done on a plain paper would suffice the purpose.
  2. There are no restrictions on the occasion of showering the love by gifting the amount to the near & dear ones. One can make the gift to his children at any number of times. Enjoy gifting!



Query 2]

Please guide whether deduction u/s 80C is also available if the person is having any income from Short term capital gain? []


No deduction under Chapter VI-A is available against Short Term Capital Gain (STCG) arising on sale of shares/unit of equity oriented fund which is subject to securities transaction tax or Long Term Capital Gain (LTCG) arising on transfer of any long term capital assets. [However, deduction under chapter VI-A is available against STCG arising from transfer of short term capital assets other than those mentioned above].

It may be noted that Chapter VI-A not only includes section 80C which provides for a deduction up to Rs. 1.50 Lacs towards LIC/PPF/Housing loan principal repayment, ELSS etc but also incorporates other commonly used deduction like section 80D which provides for deduction toward health insurance premium, section 80E which provides for deduction towards education loan, section 80CCD which provides for deduction towards New pension Scheme etc. However, unutilized basic exemption limit can be reduced from the amount of STCG/LTCG & only the balance amount would be taxable. For example, if an individual taxpayer is having interest income of Rs. 1.75 Lacs & STCG on shares of Rs. 2 Lacs & applicable basic exemption limit is Rs. 2.50 Lacs then unutilized basic exemption limit of Rs. 0.75 Lacs (i.e., Rs. 2.50 Lacs less Rs. 1.75 Lacs) could be reduced from the amount of capital gain and only the resultant capital gain would be taxable. On such occasions, taxpayers can use the weapon of tax planning.

Taxpayer can invest & claim deduction under chapter VIA against income of Rs. 1.75 Lacs & thereby can increase the amount of unutilized basic exemption limit which could be reduced from the amount of capital gain. In the above illustration, by investing Rs. 1.50 Lacs in LIC/PPF/NSC etc, taxpayer could reduce the amount of other taxable income to Rs. 0.25 Lacs (i.e., Rs. 1.75 Lacs of interest income less Rs. 1.50 Lacs of investment u/s 80C). As a result of this, unutilized basic exemption limit that could be reduced from the amount of STCG/LTCG would be Rs. 2.25 Lacs as against Rs. 0.75 Lacs earlier.

Query 3]

I had paid gross premium of Rs. 17,815/- towards health insurance. This premium includes net premium of Rs. 15855/- plus service tax of Rs. 1,903/- plus education cess Rs. 38/- plus secondary & higher education cess Rs. 19/-. I want to know whether I get income tax benefit under 80D on Rs. 15,855/- or gross premium Rs. 17815/-? [R.V.Deshmukh-]


Deduction under section 80D is available towards the payment of health insurance premia. Presently, section 80D offers:
  1. deduction up to Rs. 15,000/- to an individual taxpayer in respect of health insurance premia paid to insure 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
  2. an additional deduction of Rs. 15,000/- is provided to an individual taxpayer towards amount paid to insure the health of the parent or parents of the taxpayer.
The deduction could be up to Rs. 20,000/- in both the cases if the person insured is a senior citizen of sixty years of age or above. Similar deduction is also available to a Hindu undivided family (HUF) in respect of health insurance premium paid to insure the health of any member of the HUF.

[Recent Amendment in section 80D: Few welcome changes are proposed in the recent union budget. In view of continuous rise in the cost of medical expenditure, the present limit of Rs. 15,000/- & Rs. 20,000/- as mentioned above, is proposed to be enhanced to Rs. 20,000/- & Rs. 30,000/- respectively.

Further, very senior citizens are often unable to get health insurance coverage and are therefore unable to take tax benefit offered by 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 Rs. 30,000/- shall be allowed as deduction u/s 80D.

The aggregate deduction available to any individual in respect of health insurance premia and the medical expenditure incurred would however be limited to Rs. 30,000/-. Similarly aggregate deduction for health insurance premia and medical expenditure incurred in respect of parents would be limited to Rs. 30,000/-].

The deduction is available towards whole of the amount paid to keep in force the policy of insurance which would be inclusive of service tax, education cess & higher education cess. However, readers may note that deduction u/s 80D is available only if the premium is paid by any mode other than cash. To be precise, no deduction is admissible if the premium payment is done in cash.

No deduction

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