Wealth: Tax benefits on parents' mediclaim?

My father is 66 and my mother is 62. I want to buy an insurance plan for them so their day-to-day medical needs can be covered and I can claim tax benefit for the premiums as well.

I need to know two things:

• What is the difference between insurance premium exemption under section 80C and under section 80D of the Income Tax Act?
• Are there any other sections where I can avail tax benefit for purchasing insurance plan?

-- Nalin Saxena

You must take decisions about health coverage not based on tax benefits but based on the actual need for the insurance. Tax benefits should only be viewed as incidental benefits.

In the Income-tax Act, sections 80C and 80D deal with tax benefits for the insurance premium you paid.

Section 80C gives to the tax payer a deduction upto a maximum of Rs 100,000 in a year if he invests in certain specified avenues or if he makes payments for certain specified purposes.

One of the specified purposes under this section is payment of life insurance premium on the policy in your name (taxpayer's name) or your spouse or your children. Thus, under this section, you will not get any tax benefit in respect of premium paid on the life insurance policy of your parent(s).

Under Section 80D of the Income-tax Act, you are entitled to a deduction in respect of the premium paid on the mediclaim policy in your name, your spouse and your dependant children. This deduction would be restricted to Rs 15,000 per year. In addition to this, if you have parents then you would get a further deduction of upto Rs 15,000 for premium paid on their mediclaim policy. If the parent(s) is/are senior citizen(s) then the deduction would be Rs 20,000.

Thus, section 80C gives you a deduction for payment of life insurance premium while section 80D gives you a deduction for the payment of mediclaim premium.

Sec 80C covers various items including life insurance premium while 80D covers only mediclaim premium. In section 80C, there is no requirement that the children must be dependent children whereas 80D refers to dependent children.