Medical emergencies always take us by surprise. It is always better 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. Not only can you take benefit by purchasing a health plan for yourself but also you can take advantage of buying the policy to cover your spouse, or your dependent children or parent. The best part is that it is over and above the deductions claimed under section 80C/CCC/CCD.
2. Quantum of Deduction available under Section 80D
Individual:
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 1,00,000.
The below table captures the quantum of deduction available to an individual taxpayer under various scenarios:
|
Scenario
|
Premium paid (Rs)
|
Deduction under 80D (Rs)
|
|
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 years, and his father is aged 75 years. Rohan has taken a medical cover for himself and his father for which he pays insurance premium 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 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
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.
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./span>
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 Government approved by IRDA.
b. Payment should be made by any mode other than cash.
c. Senior citizen: Senior 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.
