Very often, tax planners recommend health insurance for tax-saving purposes. Section 80D is a key consideration for individuals as it offers substantial tax benefits while securing adequate health insurance coverage. The premium paid toward medical insurance also helps reduce the individual’s tax burden, contributing to overall savings. However, benefits of 80D deduction are not available if an individual opts for the New Tax Regime .
Here is everything to know about 80D deduction limits, conditions, and ways to maximize benefits under Section 80D of the Income Tax Act.
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Section 80D
Section 80D of the Income Tax Act, 1961, allows the individuals and Hindu Undivided Families (HUFs) to claim tax deductions of up to INR 25,000 for health insurance premiums paid towards oneself, spouse, parents, and dependent children. The deduction of INR 25,000 is increased to INR 50,000 in case of senior citizens over 60 years of age and above. A maximum 80D deduction limit is INR 1,00,000 per year, allowing significant tax savings while ensuring medical coverage.
Who can claim Deduction under Section 80D?
80D deduction is allowed only to individuals and Hindu Undivided Families (HUFs). Thereby, partnership firms, trusts, corporations, and others are kept outside the purview of 80D exemptions. Moreover, only payments for health insurance premium and healthcare of senior citizens are covered under the said section.
Which Deductions are allowed under Section 80D?
Section 80D offers deductions on two types of expenses:
Health insurance premiums for self, spouse, children, and parents.
Medical expenditure for senior citizens without health insurance.
The deductions under Section 80D is presented in the tabulated form below:
Illustration of Total Deduction under Section 80D
Below is an example illustrating the total 80D deductions an individual can claim:
Can Preventive Health Check-ups Be Claimed Under Section 80D Without Medical Insurance?
Yes, expenses for preventive health check-ups can be claimed under 80D deduction even without medical insurance. This provision under Section 80D assists individuals who may not afford health insurance but still prioritize preventive health check-ups. Senior citizens without health insurance can claim 80D medical expenditure deduction, ensuring relief despite high healthcare costs.
The intent of providing the allowance of preventive health check-up under Section 80D is to benefit the individuals who are spending on the same and are unable to afford the medi-claim policy may be due to the high premium costs.
Senior citizens usually pay high health insurance premiums due to their older age and variety of health complications. As a result, some insurance companies may charge senior citizens high premiums that they cannot afford. They can claim deductions under Section 80D if they have incurred expenses on healthcare. This offers relief to such senior citizens who cannot afford health insurance but incur a significant medical expense.
What are the Modes of Payment allowed under Section 80D?
To claim deductions under Section 80D, only certain payment modes are allowed:
Health Insurance Premium: All modes except cash.
Preventive Health Check-ups: Debit card, credit card, UPI, or cheque.
This ensures transparency and traceability for 80D medical insurance payments.
How to claim Deduction under Section 80D?
Claiming 80D deduction is straightforward. Taxpayers need proof of payment for health insurance and preventive health check-ups. These receipts can be submitted to an employer or during Income Tax Return (ITR) filing, thereby reducing taxable income for both individuals and HUFs.
An assessee can claim deductions under Section 80D by sending receipts for paying insurance premiums and medical bills to your employer. Moreover, he can also claim the deductions directly by providing proof when filing the Income Tax Return (ITR).
What are the Benefits of Section 80D?
Following benefits are available under Section 80D for having a health insurance plan:
Reduction in Tax Liability: Section 80D deduction can be claimed by the assessee himself or for the family towards the premium paid for the health insurance policy. Thereby, allowing individuals to reduce their tax liabilities.
Coverage of Preventive Health Check-up: Deductions for preventive health check-ups under 80D encourage early healthcare interventions.
Deduction for Parents (Parental Coverage): Deduction for health insurance premiums paid toward parents, including senior citizens. An individual can claim deduction not only for oneself but also for the parents, whether or not dependent on the individual. The payment towards the premium of health insurance of parents and the preventive health check-ups can be claimed as a deduction by the individual.
Coverage of Premiums paid towards pre-existing Disease and Critical Illness: 80D deductions apply to premiums for critical illness riders, securing financial protection for severe health conditions.
Provision for Multi-year Health Insurance Premium under Section 80D
More often the insurance providers offer multi-year insurance plans to the buyer wherein the insurance period covered is more than a year. The reason for offering a multi-year insurance plan is the competitive pricing option availability to the buyer. The premium is paid in advance by the policyholders in such instances.
Under Section 80D, an assessee can claim proportionate deduction for the premium paid towards the multi-year health insurance.
Medical Expense Deduction for Senior Citizens under Section 80D
Section 80D provides a unique provision for senior citizens, allowing them to claim medical expense deductions of up to INR 50,000 without insurance coverage. This provision eases the financial burden on families with elder dependents who may face high healthcare costs.
For instance, Mr. Kashyap has incurred INR 80,000 on the medical treatment of his parents, who don’t have any health insurance coverage. In this instance, Mr. Kashyap will be able to claim a maximum tax deduction of INR 50,000.
How is Critical Illness Covered under Section 80D?
In cases of critical illnesses such as cancer or heart disease, individuals may purchase a critical illness rider policy. Premiums paid for this policy are deductible under 80D medical insurance, ensuring tax relief while securing financial protection for severe illnesses.
For instance, if anyone is diagnosed with dengue and needs to be hospitalized, the cost of a few days of hospitalization can be super costly. Then what would be the cost of severe medical conditions like cancer, heart attack, or cardiac arrest. If an individual does not have any health insurance, the cost incurred on medical treatments would have to be paid from his own pocket.
That is where, critical illness rider policy or scheme of insurance comes into picture. People choose critical illness rider policy to protect their finances towards the ugly medical costs. The deduction of premium paid towards such policy is also available to the individuals covering themselves under the critical illness rider policy.
Exclusions from Section 80D
Exclusions from Section 80D include:
The unpaid amount of premium during the financial year.
Where the premium is paid by the employer in case of group health insurance of employees.
Where the premium is paid on behalf of siblings, grandparents, independent children, and other relatives.
Where the amount of premium is paid in cash.
Things to Remember for Section 80D
Following points should be remembered while claiming deduction under Section 80D:
Additional to Section 80C: The taxpayer can claim 80D deduction in addition to Section 80C.
Applicable to HUFs: Hindu Undivided Families (HUFs) are also allowed to claim deduction under Section 80D apart from individuals and his family members.
Tax Benefits: The tax benefits must be evaluated by the taxpayer carefully at the time of selecting the health insurance plan.
Payment Modes: Only non-cash payment modes are eligible for health insurance deductions.
FAQ
Q1. Who are the eligible assessees under Section 80D?
The benefit of Section 80D can be availed by individual assessees and Hindu Undivided Families (HUFs). However, for HUFs, the maximum limit for 80D deductions is INR 25,000.
Q2. Is there an allowance for group health insurance under Section 80D?
Section 80D does not allow deductions for group health insurance. However, individuals can claim 80D deduction on independent health insurance policies.
Q3. If an individual has obtained multiple health insurance policies, can he claim deduction under Section 80D for such multiple health insurance policies?
Yes, an individual can claim deduction under Section 80D for multiple health insurance policies obtained by him. However, the terms and conditions of Section 80D must be complied with.
Q4. Explain preventive health check-ups under Section 80D?
Preventive health check-ups identify health risks early. Section 80D allows up to INR 5,000 annually toward these check-ups, promoting preventive care.
Q5. What is the limit of deduction for preventive health check-ups under Section 80D?
The maximum deduction under Section 80D for preventive health check-ups is INR 5,000 per financial year. This can be claimed by the assessee for ownself, parents, spouse, or dependent children.
Q6. Can an individual claim deduction under Section 80D for overseas health insurance?
Yes, an individual can claim deduction under Section 80D in case he has obtained overseas health insurance. However, the insurance company should be registered with the Insurance Regulatory and Development Authority of India (IRDAI).
Q7. Can an individual pay the insurance premiums in cash for claiming deduction under Section 80D?
No. An individual cannot make the payments of insurance premiums in cash. The modes of payment towards the insurance premium should be other than cash only.
Q8. Can an individual claim deduction towards the premium of health insurance paid for the independent children?
No, only dependent children’s premiums qualify under 80D. Only in case of premium paid towards the health insurance of dependent children, an individual is allowed to claim deduction under Section 80D.
Q9. Can a deduction under Section 80D be claimed towards the premium paid for the health insurance of independent parents?
Yes. The individual can claim deductions under Section 80D, provided other conditions are satisfied, where he has paid the premium of health insurance of independent parents.
Q10. Can an individual claim the deduction of premium paid towards the health insurance of the spouse who is independent?
Yes, 80D allows deductions for premiums on the spouse’s health insurance regardless of dependency.
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