Can spouses split health insurance premium to claim tax benefit under section 80D?
Will the insurer issue two separate tax certificates to the spouses for paying the premium in parts for one health policy? Here's what tax and insurance experts have to say.
A family floater health insurance plan covers two or more members of the family for a fixed sum assured in exchange for a single annual premium. Here, what one should remember is that the premium amount of such a policy can lie somewhere in between Rs 25,000 and Rs 50,000. However, as per the number and age of family members you want to get insured, the type of policy you need, and the sum insured you have selected, the premium may differ and even go beyond the range mentioned above.
Hence, at times, it may happen that the policyholder may either not be able to pay the premium amount in one go or the premium may be higher than the maximum on which he can get tax benefits under section 80D of the Income Tax Act. In such a case, a couple may want to split the premium between themselves and pay a portion individually.
The question arises, can you split the premium in any ratio between yourself and your spouse to claim tax-saving deduction under section 80D? Also, will the insurer issue two separate tax certificates to the spouses for paying the premium in parts for one health policy? Here's what tax and insurance experts have to say.
Splitting of insurance premium to avail tax benefit
The deduction under section 80D of the Act is available in respect of self, family and your parents. According to tax experts, income tax laws do not disallow or bar splitting of premium payment between two individuals for a single policy in order to claim tax benefit under section 80D. However, insurance experts are divided over whether separate tax certificates can be issued to two individuals paying premium in parts for a single policy.
Tax experts' view
Homi Mistry, Partner, Deloitte India said that there is no specific mention in the Act regarding splitting of the insurance premium paid by spouses. An individual would be allowed to claim a deduction, based on the actual premium paid by him during a particular financial year, subject to the limits and conditions as prescribed by the Act, he said. "However, it would be preferable if you and your spouse pay the amount through separate bank accounts." He said, "You may also know that there is nothing in the Act which mandates that you or your spouse need to buy separate policies for claiming a deduction in your individual tax returns."
Archit Gupta, Founder & CEO, Cleartax.com said that in income tax act there is nothing such thing mentioned that individuals cannot split premium while making payment against one policy. Hence, in case one wants to split insurance premium paid under a policy between husband and wife and claim separately under section 80D, they can do so. "But in such a case your insurer will have to split the premiums themselves when issuing the policy," he added.
Will insurer issue two tax certificates for premium payments?
Some insurers said that they could issue two tax certificates for premium paid in parts for a single policy subject to certain terms and conditions. However, other insurers disagreed, and some didn't respond to our emails regarding the issue.
Insurers' who agreed
Anuj Gulati, MD & CEO, Religare Health Insurance said that there are health insurance policies with a family floater option, where the insured can add up to 5 family members including parents, siblings, spouse and children. Hence, in such a way one can save tax on the premium of up to Rs 75,000 as defined under section 80D of the Act with a single policy. Gulati further said premium for a single policy can be paid by two individuals provided they are related. Both individuals will be issued tax certificates basis the respective premiums paid by them. "You can choose the amount you wish to pay as there are no rules on the minimum amount that each one needs to pay," he said.
Bhabatosh Mishra, COO, Apollo Munich Health Insurance said that premium for one health insurance policy can be split and paid by the policyholder and his/her spouse given that both of them are covered in the same policy. "Tax certificate will be issued to you in accordance with the premium paid by you and your spouse," he said.
Insurers' who disagreed
Contrary to this, Anand Roy, Executive Director & CMO, Star Health and Allied Insurance said that separate tax certificates would not be given to spouses for paying premium for a single policy. The tax deduction benefit under section 80D can be availed by the proposer, which is limited to one person per policy only. "Also, you can avail the benefit only once per policy cycle," he added.
Eswaranatrajan N, COO & Senior EVP, Kotak General Insurance said, "For one policy we can issue only one certificate. Since the premium amounts are approved by the regulator and only what has been approved can be quoted."
Similarly, Sasikumar Adidamu, CTO, Bajaj Allianz General Insurance said that under one health insurance policy there can be only one proposer. "You and your spouse cannot split the insurance premium amount and claim it separately for taking the deduction because only the person (who is the proposer) paying the premium can claim deduction under section 80D of the Act," he said.
However, Subrata Mondal, EVP (Underwriting), IFFCO Tokio General Insurance said that the health insurance premium can either be paid by a policyholder or a spouse. "But the person who pays the premium becomes the primary policyholder and the receipt is issued in his or her name. Therefore, considering that there can only be one proposer for a health insurance policy the tax benefit can only be claimed by one individual," he added.
Can only proposer claim tax relief?
According to tax experts, it is not mentioned anywhere in tax laws that one has to be a proposer of policy to pay the premium and claim tax benefit subject to the deduction limit. "There is nothing mentioned in the Act which prohibits claiming the deduction, for payment made (as prescribed), only because the taxpayer is not the proposer of the policy," said Mistry
Shanmuga Prasad, Tax Director, People Advisory Services, EY India, said, "We understand that 'proposer' in terms of insurance would mean the policy owner. However, section 80D of the Act lays down that deduction for the medical insurance premium can be claimed by an individual who pays the premium for self/spouse/dependent children/parents. Also, it does not specifically mention that the taxpayer needs to be the policy owner".
Is it possible to have two proposers in a single policy?
A proposer is merely a policy owner who purchases the policy and pays the premium. Kapil Mehta, CEO, Securenow.in, a Delhi-based insurance broker, said, "You may note that there is no prohibition in law for having more than one proposer. However, still, you may not find the option of making multiple proposers in a health insurance policy as the standard practice followed by the insurer is to have just one proposer. Even the proposal forms also cater to just one proposer."
Points to note
According to tax practitioners, while theoretically you can split the premium and claim the tax benefit separately, practically you may face a problem if any scrutiny arises. In a situation like this, tax-experts say that the health insurer issuing separate tax certificates in the name of spouses is a must. This will help in claiming tax benefit and also, one can keep it as a record for proof.
Rajat Mohan, Partner, AMRG & Associates said technically income tax law requires a payment to be made for permissible insurance policies and in case such payment is supplemented by a tax benefit certificate from the insurance company then taxpayers can claim the benefit on each individual payment against the policy. "Therefore, before you and your spouse make such payments, first you should ask your insurer whether it would issue separate tax certificates for premium payment for a single policy."
Max Bupa Health Insurance, Aditya Birla Health Insurance, Aviva Health Insurance and Royal Sundaram Health Insurance did not respond to this correspondents' queries on the above subject.