Section 80D - Health Insurance Deduction Under Income Tax

1. Individuals

1. Hindu Undivided Families (HUFs)

Note: No other entities, such as companies or firms, are eligible to claim this deduction.

Allowable Deductions Under Section 80D

The following expenses qualify for the deduction:

1. Medical insurance premiums paid for self, family, and parents

1. Medical expenses incurred for senior citizens

Who Can Claim Deductions?

Individual taxpayers or HUFs can claim deductions for insurance premiums paid on behalf of:

1. Self

1. Spouse

1. Dependent children

1. Parents

Payments Eligible for Deduction Under Section 80D

An individual or HUF can claim deductions for the following payments:

Health Insurance Premiums (paid in modes other than cash):

1. Up to Rs. 25,000 for self, spouse, dependent children, or parents.

1. Up to Rs. 50,000 if the insured family members or parents are senior citizens (aged 60 years or above).

Preventive Health Check-ups (cash payment allowed):

1. Up to Rs. 5,000 for self, spouse, dependent children, or parents.

Medical Expenses:

1. Senior citizens (resident individuals aged 60 years or above) without health insurance can claim a deduction of up to Rs. 50,000 for medical expenses incurred.

1. Note: Although the Income Tax Act does not specifically define 'medical expenditure', it generally includes costs such as medical consultations, medicines, and aids for impairments.

Contribution to CGHS or Notified Schemes:

1. A deduction of up to Rs. 25,000 is allowed for contributions to the Central Government Health Scheme (CGHS) or other notified schemes.

1. Contributions made on behalf of parents are not eligible for this deduction.

Mode of Payment under Section 80D

To claim such deduction under Section 80D, the payment needs to be made in the specified mode:

Deduction Available under Section 80D

As mentioned before, Section 80D will help you in getting tax deductions on medical insurance premiums only. The deductions allowed are as follows:

The deduction for preventive health check-ups, up to Rs. 5,000, is included within the overall limit of Rs. 25,000 or Rs. 50,000. It is important to note that 'family' under this section refers only to the spouse and dependent children.

Example:

Shyam is 45 years old, and his father is 75 years old. Shyam has taken medical insurance for himself and his father, paying premiums of Rs. 30,000 and Rs. 35,000, respectively.

Shyam can claim up to Rs. 25,000 for the premium paid on his own policy. For the policy taken for his father, who is a senior citizen, he can claim up to Rs. 50,000. In this case, the deduction allowed is Rs. 25,000 for his policy and Rs. 35,000 for his father's policy.

What is a Preventive Health Check-up Under 80D?

In 2013-14, the government introduced a deduction for preventive health check-ups to encourage individuals to prioritise their health. Preventive health check-ups are aimed at early detection of illnesses and reducing risk factors through regular medical examinations.

Under Section 80D, a deduction of Rs. 5,000 is allowed for payments made towards preventive health check-ups. This deduction is part of the overall limit of Rs. 25,000 or Rs. 50,000, depending on the circumstances.

The deduction can be claimed for expenses incurred for the individual, their spouse, dependent children, or parents. Payments for preventive health check-ups are eligible even if made in cash.

Example:

Ravi paid a health insurance premium of Rs. 23,000 for his wife and dependent children during the financial year 2023-24. Additionally, he incurred Rs. 5,000 for a health check-up for himself.

Ravi can claim a maximum deduction of Rs. 25,000 under Section 80D of the Income Tax Act. Of this, Rs. 23,000 is for the insurance premium, and Rs. 2,000 is for the health check-up. The deduction for the preventive health check-up is limited to Rs. 2,000, as the total deduction cannot exceed Rs. 25,000 in this case.

Deduction under Section 80D for treatment of a dependent with Disability

You can raise a claim of up to Rs.75,000 in a single financial year under Section 80DD of the Income Tax Act on the medical expenses incurred while getting a dependent treated who has certain disability.

A tax deduction of Rs 1,25,000 in a single financial year is allowed, if the disability is severe. However, it is mandatory to submit a medical certificate stating the disability issued by the central or state government’s medical board while filing income tax returns.

1. In case the individual has made an annuity or lump sum payment for any scheme in any insurance providing company for maintaining the health of the dependent disabled person, he can raise a claim under Section 80DD.

1. Tax deductions under Section 80DD are allowed on medical expenses incurred on the cost of medical treatment, nursing, training, and rehabilitation of a dependent with a disability. Dependents can either be the spouse, children, parents or siblings.

1. Section 80DD also allows tax deductions on medical expenses associated with the care, nursing, education, or rehabilitation of a disabled dependent. A dependent can be a spouse, child, parent, or sibling.

To file income tax returns, you must provide a medical certificate from either the state or the central government's medical board that confirms the disability.

Section 80D Deduction Limit

As per Section 80D, a taxpayer can claim deductions on health insurance premiums paid for self/family and parents, apart from deductions on expenses related to health check-ups. The overall deduction limits are as follows:

Example:

Suppose you are 60 years old paying an yearly premium of Rs.32,000 for yourself and your dependents. Apart from this, you are also paying a health premium of Rs.35,000 for your parents' policy, who are 80 years old. As per Section 80D terms, you are eligible for:

1. Tax deduction of Rs.32,000 on Rs.32,000 paid as health insurance premium for you and your dependents.
2. Tax deduction of Rs.35,000 for your parents (senior citizens) out of the overall payment of Rs.35,000.
3. Total tax deduction that can be claimed is Rs.67,000 out of the overall premium payment of Rs.67,000.

Note: Please note that the maximum tax deduction which can be claimed is subject to the provisions under Section 80D of the Income Tax Act. Always consult an expert to get the most out of the tax saving provisions.

Multi-year Health Insurance Premium Paid in Lump Sum

People may choose multi-year health insurance plans owing to the price reductions available. In this instance, they pay the premium in advance.

Section 80D allows a proportionate deduction in that situation. However, this would be subject to the above-mentioned restrictions of Rs.25,000 and Rs.50,000.

Section 80D and 80C

Section 80D is sometimes confused with, Section 80C. Section 80C provides deductions up to Rs.1.5 lakhs per year while Section 80D offers deductions up to Rs.65,000, subject to conditions.

Another differentiating point is that Section 80C includes investments made in a wide range of financial instruments such as small savings schemes, Life insurance premium, mutual funds etc., while Section 80D is meant exclusively for deductions on health insurance premiums paid.

Tax Benefits on Health Insurance for Senior Citizens

1. According to Section 80D of the Income Tax Act of 1961, senior citizens in India are eligible for the health insurance tax benefits.
2. These benefits may be claimed by the senior citizen themselves or by their children if the latter pays the bill for the elderly parent's health insurance.
3. For a policy you purchase for yourself, your spouse, or your dependent children, you are eligible for a tax deduction.
4. If you purchase health insurance, you can avail deductions up to Rs.25,000 under Section 80D for yourself and your family (Rs.50,000 if the insured is 60 years or older) and up to Rs.25,000 (Rs.50,000 if the insured is 60 years or older) for your parents.
5. In addition, you are eligible for a tax deduction of Rs.5,000 per year for preventive healthcare for your family.

Deduction for Mediclaim under Section 80D

The deduction of Mediclaim under Section 80D happens so that your insurance policy stays active. This insurance can be for the policy holder or for the spouse of the policy holder. Mediclaim is of utmost importance as it takes care of your medical expenditure bills, if you fall ill and require medical assistance.

Points to be remembered at the time of purchase of medical insurance

There are certain points you must keep in mind before purchasing medical insurance:

1. If you pay premium on behalf of working children, you cannot claim tax exemption under Section 80D.
2. You cannot claim tax deduction under Section 80D if you pay premiums on behalf of your siblings, grandparents, uncles, aunts, or any other relatives.
3. In case you and your parents have part paid your premiums, then both of you can claim tax benefits under Section 80D.
4. You cannot claim tax deduction for the premium paid for group medical health insurance provided to you by your employer.
5. You will have to take the deduction without taking the service tax and cess portion from premium amount payable.