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Medical emergencies always take us by surprise. It is always advised to be safe than sorry and it is no different when it comes to medical insurance. A must in your investment portfolio, the government encourages everyone to buy 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 for their medical insurance which is taken from their total income in any given year. In this article, we will talk about the deduction available for the FY 2018-19. Not only can you take benefit by purchasing a health plan for yourself but also you can take the benefit by purchasing the policy to insure your spouse, or your dependent children or parent. And the best part is, that it is over & above the deductions claimed under section 80C/CCC/CCD.

2. Quantum of Deduction available under Section 80D

Individual: An individual can claim a deduction of up to Rs 25,000 for the insurance of self, spouse, and dependent children. An additional deduction for the 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 your parents are aged above 60.

If both the taxpayer and the parent whom the medical covers have been taken for are aged more than 60 years, the maximum deduction that can be availed 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:

Scenario

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 50,000 75,000
Both individual, family and parents above 60 years 50,000 50,000 1,00,000
Members of HUF 25,000 25,000 25,000
Non-resident individual 25,000 25,000 25,000
Note: Senior citizen will also include very senior citizen

Example:

Rohan is aged 45 and his father is aged 65 years. Rohan has taken a medical cover for himself and his father for which he pays insurance of Rs.30,000 and Rs.35,000 respectively. What would be the maximum amount he can claim by way of a deduction under Section 80D for FY 2018-19?

Ans: Rohan can claim up to Rs 25,000, for the premium paid on his policy.

As for the policy taken for his father, who is a senior citizen, Rohan can claim up to Rs.50,000. In the given case, the deduction is Rs 25,000 and Rs 35,000. Therefore, the total deduction that he can claim for the year is Rs.60,000.

HUF

An HUF can claim a deduction under section 80D for a mediclaim taken for any of the members of the HUF. This deduction will be Rs.25,000 if the member insured is less than 60 years, and will 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 to a deduction of 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. This deduction can also be claimed either by the individual for himself, spouse, dependent children or parents. The payment for preventive health check-up can be made in cash.

Example 1:Example 1: Rahul has paid a health insurance premium of Rs.23,000 for the insurance of the health of his wife and dependent children in the financial year 2017-18. He also got a 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 for a 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 claiming a deduction with regards to single premium health insurance policies. Under the new provision, where a taxpayer has made a lumpsum premium payment in a single year for 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.

5. Things to keep in mind before investing

a. Contribution towards health insurance plan has to made to a scheme as specified by the Central Govt./ approved by IRDA.

b. Payment should be made by any mode other than cash.

c. Meaning of Senior citizen- Sr. Citizen means an individual resident in India who is of the age of 60 yrs or more during the relevant financial year.

d. Premium paid towards a brother, sister, grandparents, aunts, uncles or any other relative cannot be claimed as a deduction for taking tax benefit.

e. Premium paid on behalf of working children cannot be taken for tax benefit.

f. In the case of part payment by you and a parent, both of you can claim a deduction to the extent paid by each.

g. The deduction has to be taken without showing the Service Tax and Cess portion from the premium amount.

h. Group Health Insurance premium provided by the company is not eligible for deduction.