'Split tax benefit on new health scheme'
15 02 08 - 11:55
MUMBAI: Customers who have recently bought Life Insurance Corporation of India's newly launched unit-linked health insurance scheme Health Plus, will be in for a shock.
Especially if they were counting on the fact that the entire premium amount will be eligible for tax benefits under section 80D.
It is reliably learnt that the Insurance Regulatory and Development Authority (IRDA) has written to LIC on Thursday asking it to split the benefits.
As per this, only the portion of risk premium that accounts for basic health cover will be eligible for benefits under section 80D, while the balance or premium that goes towards the unit-linked scheme will have to come under section 80C.
An IRDA official said since the product was linked to investments and earned a return, as per the Income-Tax Act, that portion of premium was not eligible for benefits under section 80D.
Under section 80D of the I-T Act, a person gets a deduction on premium paid towards mediclaim up to Rs 15,000 (Rs 20,000 for senior citizens).
Section 80C allows investment up to Rs 1 lakh to avail tax benefits. This section covers all other investment options like the payments on mutual funds, life insurance premium, repayment of prinicpal amount of a home loan, national savings certificate and even public provident fund.
Adding one more component in the form of a unit linked health insurance plan, will mean the investor will have to apportion smaller amounts to other investment avenues or forego the possibility of getting any tax benefit on this scheme.
The portion of risk premium assigned to the health cover in Health Plus is smaller compared to the premium amount assigned to the unit linked component.
A senior LIC official said that given this development the corporation will have to discuss the issue further and consider its options. The official also added that LIC will structure future products in such a manner to give maximum tax benefit under section 80D.
This change, say agents, is going to be a huge disadvantage to customers. "Most of my customers have been looking forward to a product that allows them health cover, has a tax benefit and also gives them a return on investment. That is the sales pitch we have been using," says a Mumbai-based LIC agent.
The agent told TOI that LIC had informed the agents that the tax benefit available to customers will be section 80D.