Section 80D Deductions - What is Section 80D? Deductions Under Medical Insurance, Eligibility And Policies

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 is not covered under health insurance and depends 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 of tax deductions under Section 80D. 

What is 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 premium paid for the policy to cover a spouse, dependent children or parents.

The best part is that it is over and above the deductions claimed under Section 80C.

Who is eligible for deduction under Section 80D? 

Deduction for medical insurance premiums for self and family and medical expenses incurred for senior citizens is allowed to the Individual or HUF category of taxpayers only. 

Individual or HUF taxpayers can avail of the insurance premium payments made for:

• Self 
• Spouse 
• Dependant children 
• Parents

Any other entity cannot claim this deduction. For example, a company or a firm cannot claim a deduction under this section.

Payments eligible as deduction under Section 80D

An individual or HUF can claim a deduction under Section 80D for the payments mentioned below:

• A medical insurance premium paid for self, spouse, dependent children or parents in any mode other than cash.
• Expenditure incurred on account of preventive health check-ups.
• Medical expenditure incurred on the health of senior citizens (aged 60 years or above) who are not covered under any health insurance scheme.
• The contribution made to the Central Government health scheme or any scheme as notified by the government.

Deduction available under Section 80D

The deduction allowed under Section 80D 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:

*The deduction for premium paid includes the deduction of preventive check-up of up to Rs 5,000. 

Please note that 'family' under this section includes only the spouse and dependent children.

Individual: 

• An individual can claim a deduction of up to Rs 25,000 for the premium paid for self, spouse, and dependent children.
• An additional/separate deduction for parents' insurance premium paid is available to the extent of Rs 25,000 if they are less than 60 years of age or Rs 50,000 if your parents are aged above 60.
• If medical expenses incurred for senior citizens (taxpayer/family and parents) are not covered under any medical insurance, you can claim a deduction for the said expenses up to a maximum of Rs 5,000 under the above limit of Rs 50,000.
• If the individual or spouse and parents are aged more than 60 years, for whom the medical covers have been taken, the maximum deduction that can be availed under this section is Rs 1,00,000. 
• Senior citizen includes senior and very senior citizen above 60 years of age.
• Medical expenses incurred by individuals, family or parents below 60 years cannot be claimed as a deduction.

HUF

• HUF can claim a deduction under Section 80D for insurance premiums paid for a policy taken for the members of the HUF.
• This deduction will be Rs 25,000 if the members insured are less than 60 years and will be Rs 50,000 if any of the members is 60 years of age or more.

Example: 

Rohan is aged 45 years, and his father is aged 75 years. Rohan has taken 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.

What is a preventive health check-up under 80D?

The government introduced preventive health check-up deduction in 2013-14 to encourage citizens to be more proactive towards health. Preventive health check-ups aim to identify any illness and mitigate risk factors at an early stage through frequent health check-ups.

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, his spouse, dependent children or parents. The payment for preventive health check-ups can be made in cash.

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For Example:

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 the 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.

Single-premium health insurance policies

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.

How to buy medical insurance?

There are many factors to be considered before purchasing health insurance. Here are some points to be considered from the standpoint of claiming a deduction under Section 80D and other general clauses before buying any medical insurance:

• Contribution towards health insurance should be made to schemes specified by the Central Government or any other insurer and approved by IRDA, i.e. Insurance Regulatory and Development Authority.
• Please ensure that insurance premium payment is made by any mode other than cash. Also, it will be very convenient if the policy offers a cashless claim settlement process with sufficient network hospitals covered in your city. One should check the list of the network hospitals which have tie-up with your insurer for processing cashless claims.
• Hospital room rent and other expenditures are allowed on a fixed percentage of the sum insured. Hence, choosing a sufficient sum insured is important before purchasing health insurance.
• Please carefully consider the clause relating to pre and post-hospitalisation expenses. Many policies cover all the expenses incurred before 30 days and after 90 days of hospitalisation.
• Many insurance providers have started including alternative therapies like Ayurveda, Yoga, Naturopathy, Unani, Siddha and Homeopathy (abbreviated as AYUSH). This can be important to many and should be duly considered.
• Many other expenses get incurred, like lab tests, specialised doctor's visits, etc. Many policies now provide daily cash limits as reimbursement for such additional expenses. Check the details of the daily cash limit offered, as this help to meet the extra expenses which are not otherwise covered for settlement of the claim.
• Many insurance companies provide yearly health check-ups as added benefits. Health check-ups include various tests and health evaluation, which is essential and helpful in the early diagnosis of any illness.
• Please consider the clause of a no-claim guaranteed bonus every year. Many insurance providers offer a no-claim bonus added to your sum insured for all those years for which the policyholder made no claim. This increases the sum that can be claimed, giving additional security. However, it should be noted that all allowed expenditures, like the choice of hospital room, are linked to the original sum assured, excluding the no-claim bonus.
• Post-pandemic, most of the insurance providers are offering COVID coverage. However, details like coverage of COVID, the cap on expenses, daily cash benefits, and miscellaneous charges like PPE kits, if covered or not, should be known before purchasing the insurance.

Points to be remembered at the time of purchase of medical insurance for claiming 80D deduction

• A medical insurance premium paid for a brother, sister, grandparents, aunts, uncles or any other relative cannot be claimed as a deduction for taking tax benefits.
• Premium paid on behalf of working children cannot be taken for tax benefit.
• In the case of part payment by you and a parent, both of you can claim a deduction to the extent paid by each.
• The deduction must be taken without showing the service tax and cess portion from the premium amount.
• Group health insurance premium provided by the company is not eligible for deduction.
• Premium paid by any mode other than cash is allowed for deduction. Hence premium paid by credit card or other online mode is also allowed for deduction.

Frequently Asked Questions

What is the 80D deduction in income tax?

As per section 80D, a taxpayer can deduct tax on premiums 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. An 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, is above 60 years of age, then an additional deduction of Rs 50,000 is allowed instead of Rs 25,000.

What is the maximum deduction under section 80D?

Maximum deduction allowed varies in different scenarios as below:

• An individual can claim a maximum deduction of Rs 25,000 for insurance premiums 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 (ii) parents below 60 years of age.
• 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. 
• Further, 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 a deduction for medical expenses incurred for senior citizens subject to certain conditions and within the limit of Rs 50,000.

How to claim a deduction under section 80D?

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 cards, credit cards and net banking. 

Who can claim an 80D deduction?

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 the case of non-resident senior citizens. 

Which document is needed for preventive health check-up tax deduction under Section 80D?

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. 

Which expenses are not allowed as deductions under Section 80D?

• Health Insurance premium paid in cash
• Payment made on behalf of working children, siblings, grandparents or any other relative
• Group health insurance premium made by a company on behalf of an employee

Can I claim a deduction for medical expenses incurred for my parents during the financial year? 

Yes. You can claim medical expenses for your parents when they are above 60 years within the limit of Rs 50,000. You cannot claim medical expenses deduction if your parents are below 60 years old. You need to have the bills and receipts for the expenses paid by you (in any mode other than cash) to claim the deduction for your parents above 60 years.

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