About Deduction under section 80 D

You are probably aware that the premium you pay on health insurance policy is tax deductible under Section 80 (D) of the Income Tax Act 1961. Until budget 08 came around there was a Rs. 15000 cap on health insurance deductibles for individuals. This cap integrated the premium paid on health insurance for the individual, his/her spouse, dependent children, and the individual's parents. In effect you could claim Rs. 15000 as deductible on health insurance under Section 80 (D). Budget '08 has come up with a very good distinction that increases your tax exemption while giving better coverage for your family and parents. Here is the relevant revised section of the Income Tax Act, 1961:

While computing the total income of an assessee being an individual there shall be a deduction of sum specified in sub-section (2), clause (a) and (b) of Section 80 (D).

Sub-section (2): Where the assessee is an individual the sum deducted from his/her taxable income shall be the aggregate of the following:

• The whole amount paid to effect or to keep in force an insurance on the health of the assessee or his family (here family means wife and dependent children of the assessee) but not exceeding Rs. 15000.
• The full amount paid to effect or to keep in force insurance on the health of parent or parents of the assessee but not exceeding Rs. 15000 in aggregate.

This means is you can now get spend a tax exempt Rs. 15000 towards your family's health Plus another Rs. 15000 towards the health insurance of just your parents. Therefore effectively you are eligible for Rs. 30000 - double the deduction from previous years. 

Here is another piece of information that you probably not aware of: You can also deduct premium paid towards a critical illness rider on your life insurance policy under Section 80 (D).

So it is not just that you are providing adequate health cover for your family as well as your elderly parents, you are saving on tax paid too.  

U/s 80D up to Rs 15,000 health insurance premium paid of self/spouse/children is eligible for deduction in addition Rs 20,000 is also eligible for deduction for health insurance premium paid for Sr. Citizen.

The premium is to be paid to effect or keep in force insurance policy, there is no condition that assesse should be the proposer of the policy .

Part payment of premium is allowed. For example, suppose your parents contribute 50% of their health insurance premium and you pay the balance 50% of their premium. In such a case, you could avail the deduction for the amount contributed by you and your parents too could avail deduction for their contribution.

Also the deduction u/s 80 D is allowed on payment basis i.e if you have paid premium in arrear or advance, the deduction will be allowed in the year when such premium was paid irrespective of the year to which such premium pertains.

Analysis of India first's Money Back Health Insurance Plan

Under single premium plan if you pay a premium of Rs 30,000, they appropriate Rs 10,500 towards health insurance and 19,500 towards ULIP.

So you can claim deduction under both 80 C for 19,500 and 80 D for 10,500. 

At the end of the 5 years they project you to return you 20 thousand in worst case scenario which implies that there is no money back in actual as asserted in its name.