How can deduction for multi-year health insurance premium be availed for 80D tax benefit?

financialexpress.com:

Question: In case the premium for health insurance for more than a year has been paid in one year, can pro rata deduction be availed u/s 80D of the Income Tax Act, 1961?

Answer by Dr Suresh Surana, Founder, RSM India: Taxpayers can avail the benefit of the premium paid for multi-year health policies to be distributed pro-rata over the policy term. Thus, in case the premium for health insurance for more than a year has been paid in one year (i.e. single premium/ lump sum premium paid for multiple years), the deduction shall be allowed proportionately over the years for which the benefit of health insurance is available.

As per the provisions of this section, a deduction equal to the appropriate fraction of the amount shall be allowed for each of the relevant financial year.

Also Read: National Pension System: Tax benefits of investing in NPS

“Appropriate fraction” means the fraction, the numerator of which is one and the denominator of which is the total number of relevant financial years covered under insurance.

For instance, if a single premium of Rs 30,000 is paid for a 2-year policy, then the taxpayer can avail a deduction u/s 80D of Rs 15,000/- per annum. However, such amount of Rs 15,000 would be again restricted to the maximum amount of deduction which can be claimed u/s 80D of the Income Tax Act, 1961.

This Q&A series is published every week on Thursday.

Disclaimer: The views and facts shared above are those of the expert. They do not reflect the views of financialexpress.com