We never know when we might get embroiled in a medical emergency. It is always better to be safe than sorry and hence, medical insurance is a must in your investment portfolio. The government encourages everyone to buy adequate medical insurance and allows you to avail tax deductions on it under Section 80D.
1. Applicability of Section 80D
Every individual or HUF can claim a deduction under Section 80D in respect of medical insurance from their total income for any given year.
2. Quantum of Deduction available under Section 80D
An individual can claim a deduction of up to Rs 25,000 for insurance of self, spouse, and dependent children. An additional deduction for insurance of parents is available to the extent of Rs 25,000, if they are less than 60 years of age or Rs 50,000 (as per the Budget 2018) if parents are aged above 60.
If both taxpayer and parent in respect of whom the medical covers have been taken are aged more than 60 years, the maximum deduction available under this section is to the extent of Rs. 100,000.
The below table captures the quantum of deduction available to an individual taxpayer under various scenarios
|Premium paid||Deduction under 80D|
|Self, family, children||Parents|
|Individual and parents below 60 years||25,000||25,000||50,000|
|Individual and family below 60 years but parents above 60 years||25,000||30,000(*)||55,000|
|Both individual, family and parents above 60 years||30,000(*)||30,000(*)||60,000|
* This limit has been increased to Rs 50,000 in Budget 2018 for senior citizens, applicable w.e.f 1 April 2018.
Rohan is aged 45 and his father is aged 65 years. Rohan has taken a medical cover for himself and his father in respect of which he pays insurance of Rs. 30,000 and Rs 25,000 respectively. What would be the maximum amount he can claim by way of a deduction under Section 80D?
Ans: Rohan, for the premium paid on his policy can claim up to Rs 25,000.
In respect of the policy taken for his father, who is a senior citizen, he can claim Rs 25,000. Therefore, the total deduction he can claim for the year is Rs 50,000.
A HUF can claim a deduction under section 80D in respect of mediclaim taken for any of the members of the HUF. This deduction would be RS 25,000 if the member insured is less than 60 years and would be Rs 30,000(increased to Rs 50,000 in Budget 2018) if the insured is 60 years of age or more.
3. Preventive Health Check-up
Any payments made towards preventive health check-ups will entitle a taxpayer for a deduction up to Rs 5,000 which is within the overall limit of Rs 25,000 / Rs 30,000 (Rs 50,000 w.e.f. 1 April 2018) as the case may be.
Example 1: Rahul has paid a health insurance premium of Rs 23,000 to insure the health of his wife and dependent children in the financial year 2017-18. He also got health check-up done for himself and paid Rs 5,000.
Rahul can claim a maximum deduction of Rs 25,000 under Section 80D of the Income Tax Act. Rs 23,000 has been allowed towards insurance premium paid and Rs 2,000 has been allowed on health check-up. The deduction towards preventive health check-up has been restricted to RS 2,000 as the overall deduction cannot exceed Rs 25,000 in this case.
4. Single Premium Health Insurance Policies
Budget 2018 has introduced a new provision for claim of deduction in respect of single premium health insurance policies. Under the new provision, where a taxpayer has made a lumpsum premium payment in a single year in respect of a policy valid for more than one year, he can claim a deduction equal to the appropriate fraction of the amount, under Section 80D.
The appropriate fraction is arrived at, by dividing the lump sum premium paid, by the number of years of the policy. However, this would again be subject to the limits of Rs 25,000 of Rs 50,000 as the case may be.