How to claim the benefit for health insurance taken on behalf of parents? Answers to your personal finance queries

Q. I had taken a cancer-care policy for my father, who is 61 and retired from government service, from HDFC Life. In the said policy, I am the proposer and the life assured is my father. Here are my queries:

1. Will I be eligible for benefit under Sec 80 D as the policy premium (₹26,000) is paid by me?

2. For claiming the benefit for health insurance taken on behalf of parents, does one need to be the proposer of the policy or will a simple payment receipt suffice?

3. Recently, I read that insurance companies will demand insurable interest of the proposer in the life assured while making any claim. So, is my policy valid, as I am not dependent on my father’s pension and as such, I don’t have any insurable interest in him?

If so, shall I cancel this policy and take a new one with my father being both the proposer and the life assured?

A. Cancer-care policy issued by HDFC Life is a type of life insurance policy and is covered under Section 80C of the Income Tax Act. Deduction is allowed to an individual with respect to life insurance paid for spouse and children of the assessee, subject to a cap of ₹1.50 lakh inclusive of other deductions under Section 80C and further, the premium amount not exceeding 10% of the sum assured. Point-wise reply to your queries: You will not be eligible to claim deduction under Section 80C for the ₹26,000 paid by you for your dependent father’s life insurance. Your father may claim it in his Income Tax return once he starts paying from his account.

With respect to the deductions under 80D of the Income Tax Act, an assessee who is an individual or a HUF is eligible for deduction of premium paid up to ₹25,000 for himself and his family and ₹25,000 for his dependant parents. If his/her parents or the assessee himself is a senior citizen then they are eligible for a deduction of premium paid up to ₹50,000 or if there is no medical insurance in the name of the senior citizen, then medical expenses incurred up to ₹50,000 can be claimed as deduction.

There is no restriction under Section 80D of the Income Tax Act to be the proposer of the policy. Direct payment to the insurance company is sufficient to claim the deduction along with proper proof of payment such as a receipt/acknowledgement with respect to health insurance issued by general insurance companies registered with the IRDA.

Q. If a government employee invests in the share market, then what are the income tax rate slabs for income earned from such investments (for long term as well as short term)? And, also, which ITR form needs to be filed?

A. Income tax arises only on sale of such equity shares purchased from stock market. This is in the form of capital gains/loss, further split into long term and short term. Equity shares that are sold after holding for a period of more than one year are long-term capital gains and if not are short-term capital gains.

Long-term capital gains, as calculated according to the provisions of the Income Tax Act, are taxed at 10% if such gains are above ₹1 lakh, while short-term capital gains (sale value less purchase value) are taxed at 15%.

Further, you may also request your broker for a statement for capital gains in order to ascertain the capital gains/loss and short term and long term nature of such transactions. You will have to file ITR – 2.

(The author is partner, GSS & Associates, Chartered Accountants, Chennai)

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