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.
The majority of the population in India are not covered under health insurance and depend on their savings or borrowing in times of medical emergencies. A must in your investment portfolio, the government encourages everyone to buy medical insurance and allows you to avail tax deductions under Section 80D.
Every individual or HUF can claim a deduction from their total income for medical insurance premiums paid in any given year under Section 80D. This deduction is also available for top-up health plans and critical illness plans.
The deduction benefit is available not only for a health insurance plan for self but also for buying the policy to cover spouse, or your dependent children or parent.
The best part is that it is over and above the deductions claimed under Section 80C.
Deduction for medical insurance premiums and medical expenses for senior citizens is allowed to the Individual or HUF category of taxpayers only.
Individual or HUF taxpayers, insurance can be availed for :
Any other entity cannot claim this deduction. For example, a company or a firm cannot claim a deduction under this section.
An individual or HUF can claim deduction under Section 80D for the payments mentioned below:
The deduction allowed under Section 80Dm is Rs 25,000 in a financial year. In the case of senior citizens, the deduction limit allowed is Rs 50,000.
The table below captures the amount of deduction available to an individual taxpayer under various scenarios:
|Self, spouse and dependent children are NSC*|
Parents are NSC
|Self, spouse and dependent children are NSC|
Parents are SC**
|Self, spouse and dependent children are SC|
Parents are SC
|(A) Medical insurance premium (including preventive health check-up limit of Rs. 5000) of self, spouse and dependent children||Rs. 25,000||Rs. 25,000||Rs. 50,000|
|(B) Medical insurance premium and preventive health check-up taken for Parents||Rs. 25000||Rs. 50,000||Rs. 50,000|
|(C) Medical expenditure of self, spouse and dependent children||Not applicable||Not applicable||Covered within the limit of Rs. 50,000 in (A)|
|(D) Medical expenditure for parents||Not applicable||Covered within the limit of Rs. 50,000 in (B)||Covered within the limit of Rs. 50,000 in (B)|
|Overall Limit under section 80D||Rs. 50,000||Rs. 75,000||Rs. 1,00,000|
|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|
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 premiums 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, a senior citizen, Rohan can claim up to Rs 50,000. In the given case, the deduction allowed is Rs 25,000 and Rs 35,000. Therefore, the total deduction he can claim for the year is Rs 60,000.
The government introduced preventive health checkup deduction in 2013-14 to encourage citizens from being more proactive towards health. The idea of preventive health check-ups is to identify any illness and mitigate risk factors at an early stage through frequent health checkups.
Section 80D includes a deduction of Rs 5,000 for any payments made towards preventive health check-ups. This deduction will be within the overall limit of Rs 25,000/Rs 50,000, 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-ups can be made in cash.
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 2020-21. 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-ups has been restricted to Rs 2,000 as the overall deduction cannot exceed Rs 25,000 in this case.
Budget 2018 has introduced a new provision for claiming a deduction regarding 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.
There are many factors to be considered before purchasing health insurance. Here are some points to be considered from the standpoint of claiming deduction under Section 80D and other general clauses before buying any medical insurance:
As per section 80D, a taxpayer can deduct tax on premium paid towards medical insurance for self, spouse, parents, and dependent children. Individuals and HUF can claim this deduction. The limit of the deduction varies with age. A deduction of Rs 25,000 is available for self, spouse, and dependent children. Additional deduction of Rs 25,000 is available for insurance paid for parents aged less than 60 years. If any insurer, i.e. self, spouse or parents, are above 60 years of age, then the deduction of Rs 50,000 is allowed instead of Rs 25,000.
Maximum deduction allowed varies in different scenarios as below:
Individuals can claim a maximum deduction of Rs 25,000 for insurance premium for self, spouse and dependent children.
Individuals can claim a maximum deduction of up to Rs 50,000, if paying a premium for (i) self, spouse, dependent children, and for (ii) parents below 60 years of age.
Whereas individuals can claim a maximum deduction of up to Rs.75, 000 including for paying a health insurance premium for (i) Self, spouse, dependent children, and (ii) parents above 60 years of age.
Futher , Rs 1,00,000 can be claimed as a maximum deduction if paying a health insurance premium for (i) Self, spouse, dependent children, (senior citizens above 60 years of age) and (ii) parents above 60 years of age.
Moreover, the individual can also claim deduction for medical expenses incurred for senior citizens subject to certain condition and within the limit of above Rs 50,000.
Tax deductions can be availed on individual health insurance or family floater plans. Premiums paid towards health insurance taken for self, spouse, dependent children and/or parents are allowed for deduction.
Premiums paid towards health insurance for siblings are not eligible for deduction. Premium payments made either online or offline, except cash, are allowed. Eligible online modes of payment are debit card, credit card and net banking.
Every individual (including non-resident individuals) and HUF can claim a deduction under Section 80D. However, the higher limit of deduction available to senior citizens is not available in case of non-resident senior citizens.
The income tax department does not require submitting any document/receipt for claiming the deduction while filing ITR. However, as a matter of record and proof later, it is advisable to retain the proof of payment/receipt of insurance premium in your tax file.