If a year’s worth of health insurance premiums are paid in one year, the deduction will be granted based on the number of years that the benefit of health insurance is available.
Is it possible to claim a pro rata deduction under Section 80D of the Income Tax Act, 1961 if the premium for health insurance covering a longer period of time is paid all at once?
Response from RSM India’s founder, Dr. Suresh Surana: The prorated distribution of premiums paid by taxpayers for multi-year health policies is available to them. As a result, the deduction will be permitted based on the number of years that the health insurance benefit is available, even if the premium for more than a year was paid in a single year (i.e., a single premium or lump sum premium paid for multiple years).
For each relevant financial year, a deduction equal to the appropriate fraction of the amount shall be permitted in accordance with the provisions of this section.
“Appropriate fraction” refers to the fraction whose denominator is the total number of pertinent financial years covered by insurance and whose numerator is one.
For example, if a taxpayer pays a single premium of Rs 30,000 for a two-year policy, they are eligible for an annual deduction of Rs 15,000 under section 80D. Nevertheless, the Rs 15,000 amount would once more be limited to the maximum deduction allowable under Section 80D of the Income Tax Act of 1961.