Emergencies have a tendency to take us by surprise and we never know when we might get embroiled in one, especially a medical emergency. It is always advised to be safe than sorry and it is no different when it comes to medical insurance. It is a must in your investment portfolio. Our 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 for their medical insurance which is taken from their total income in any given year.
2. Quantum of Deduction available under Section 80D
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:
* This limit has been increased from Rs. 30,000 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 for which he pays an 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?
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 upto Rs 50,000. Therefore, the total deduction that he can claim for the year is Rs 60,000.
A 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.
||Deduction under 80D
|Self, family, children
|Individual and parents below 60 years
|Individual and family below 60 years but parents above 60 years
|Both individual, family and parents above 60 years
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.
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 claim of 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.