Section 80D: Deduction In Respect Of Medical Insurance Premia
Updated: Mar 4
Table of content
Very often, tax planners recommend obtaining health insurance while planning the taxes for their clients. Obtaining health insurance is considered as the top-most priority of an earning individual rather than anything else. Reason being, it helps provide adequate health insurance coverage to oneself, and the family. What’s more? The premium paid towards the health insurance reduces the tax burden of the individual thereby helping to save taxes.
However, this deduction cannot be availed if an individual opts for the New Tax Regime in a financial year. Here’s everything one needs to know about claiming deduction under Section 80D for reducing the tax burden.
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 aged 60 and above. A maximum deduction of INR 1,00,000 can be claimed under Section 80D.
Who can claim Deduction under Section 80D?
Deduction under Section 80D is allowed only to individuals and Hindu Undivided Families (HUFs). Thereby, partnership firms, trusts, corporations, and others are kept outside the purview of Section 80D. 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 primarily allows for two types of deductions. It includes the amount spent on health insurance premiums and the costs of healthcare for parents and other family members. The deductions under Section 80D is presented in the tabulated form below:
Illustration of Total Deduction under Section 80D
The below table is an example of total deductions allowed under Section 80D of the Act:
Can an expense towards the preventive health Check-up be claimed under Section 80D without having any medical insurance?
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.Â
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 the deduction under Section 80D, the payment must be made using the below given modes:
How to claim Deduction under Section 80D?
Claiming the deduction under Section 80D is easy, and it merely requires payment proof for the amount of medical insurance and preventive health check-ups. It reduces the total taxable income of family, and Hindu Undivided Families (HUFs), and individuals.
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:Â Under Section 80D, a 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:Â Section 80D also offers deduction for the amount expended towards the preventive check-up whether on ownself or on family.
Deduction for Parents:Â 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:Â The deduction under Section 80D also covers the premium paid towards the health insurance taken for any pre-existing disease or critical illness.
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 Expenses of Senior Citizens under Section 80D
Section 80D allows senior citizens to claim tax deductions of up to INR 50,000 even if they do not have a health insurance plan. However, if the senior citizen has health insurance, he or she cannot deduct medical expenses. 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?
Medical emergencies are always uncertain. Moreover, the financial toll of any critical illness is very expensive for the majority of the people. 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
Section 80D specifically excludes the following:
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:
The taxpayer can claim deduction under Section 80D in addition to deduction under Section 80C.
Hindu Undivided Families (HUFs) are also allowed to claim deduction under Section 80D apart from individuals and his family members.
The tax benefits must be evaluated by the taxpayer carefully at the time of selecting the health insurance plan.
The deduction can be claimed under Section 80D only if the premium of health insurance is paid by any mode other than cash.
Frequently Asked Questions
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 deduction under Section 80D is INR 25,000.
Q2. Is there an allowance for group health insurance under Section 80D?
Section 80D does not allow for the deduction of group health insurance. If an independent health insurance is obtained along with the group health insurance, the deduction in respect of such independent health insurance is allowed under Section 80D.
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?
It is a routine medical check that is used to detect a specific illness at an early stage, reducing both the health and financial risks. As a result, the government has implemented the deduction under Section 80D to encourage effective healthcare.
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?
An individual cannot claim deduction towards the premium paid for the health insurance of independent children. 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. An individual can claim the deduction under Section 80D if he has paid the premium towards the health insurance of the spouse, whether or not the spouse is dependent on the individual.
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