Question

An assessee pays a medical insurance premium for himself and his family and claims a deduction while computing total income. What is the correct position under the Income Tax Act, 1961?

• A. Deduction is allowed without any monetary limit
• B. Deduction is allowed only for senior citizens
• C. Deduction is not permitted in such cases
• D. Deduction is allowed subject to prescribed limits and conditions

Hint:

Section 80D = Health Insurance Deduction. Always check the "limit" (it varies by age) and remember that "Cash" payments are generally not allowed for this deduction!

Answer 1

The Correct Option is D

Step 1: Understand the situation.
A taxpayer pays a medical insurance premium for himself and his family, and wants to claim a deduction while working out his total income. The question asks the correct position under the Income Tax Act, 1961.

Step 2: Find the right section.
Section 80D of the Income Tax Act allows a deduction for health insurance premiums paid by an individual for himself, his spouse, and dependent children. So a deduction is indeed available.

Step 3: Note that it is not unlimited.
The deduction under Section 80D is not without limit. There are fixed money caps, and these caps are higher for senior citizens. So the size of the benefit depends on certain conditions.

Step 4: Note the mode of payment.
The premium must usually be paid through non-cash methods to get the deduction. This is another condition attached to the benefit.

Step 5: Remove the wrong options.
It is not allowed without any limit (option 1), it is not only for senior citizens (option 2), and it is not denied altogether (option 3). The deduction exists but with limits and conditions.

Step 6: State the answer.
So the deduction is allowed subject to prescribed limits and conditions. \[ \boxed{\text{Deduction is allowed subject to prescribed limits and conditions}} \]