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.
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“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.
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