Deductions permitted under the income tax act assist us in lowering our taxable income. These deductions can be availed if you have made tax-saving investments or you have sustained eligible expenses. Numerous deductions are available under different sections which will assist you in lowering your taxable income. Under Chapter VIA, popular deductions include section 80D, 80E, 80C, and 80G, amongst others. In this article, we shall look at section 80D in detail.
Understanding 80D
To combat increasing medical and hospitalisation expenses, insurance companies offer several health schemes. To encourage more citizens to insure themselves appropriately, the Income Tax Act provided various tax deductions for medical insurances under Section 80D. Having proper medical insurance is essential to lead a stress-free life. It offers financial aid at times of medical emergencies. Medical insurance that provides adequate coverage will help you save yourself from a financial crisis during medical emergencies like a severe illness or a grave accident.
Essential Aspects of a Health Insurance Policy
Before we go into the benefits of Section 80D deduction, let us take a look at some of the benefits of a good health insurance policy-
Cashless hospitalization facility
Besides other vital features like coverage for critical illnesses and other diseases, health insurance offers other benefits too. Most health insurance policies provide you with the benefit of cashless hospitalization. Insurance companies have a list of network hospitals where you can be treated for any illness or injury that your health insurance covers. The procedure to avail of this facility is a straightforward one.
Expenses of ambulance
This is another essential feature of a health insurance policy; it covers ambulance expenses too.
Other expenses
Besides the hospital bills, insurance covers any costs that might be incurred before or after hospitalization. A health insurance policy will take into consideration these costs as a liability. Insurance companies support the insured by bearing the expenses incurred before and after hospitalization.
What is Section 80D?
If your insurance portfolio is to be considered a well-rounded one, adequate medical coverage is essential. If the cost of your insurance premium is too much for you to bear, then you need to figure out how to manage the expenses of medical treatment, in case you get hospitalized. This can prove to be a massive headache for anyone. The government encourages you to buy medical coverage as well. In the Income Tax Act, Section 80D deductions are those tax deductions that are based on health insurance premiums you pay.
Under Section 80D, Every individual or Hindu Undivided Family can claim a tax deduction for the medical insurance they have opted for, which is deducted from their total income every year. The deductions applicable under Section 80D for the financial year 2018-19 (AY 2020-21) will be the focus of this article.
Under section 80D, you reap the benefits of purchasing a health plan not only for yourself, but will also benefit similarly by buying insurance for your spouse, dependent children or parents. The deductions offered under Section 80D are over and above those you can claim under other sections like section 80C/ CCC/ CCD.
Deductions on Health Insurance Premiums
Under section 80D, an individual can claim a tax deduction amount of Rs 25,000 on insurance for self, a spouse, or dependent children. If either the individual or spouse is a senior citizen, the deduction amount is set at Rs 50,000.
An added deduction for the insurance of parents is also offered by Section 80D if they are less than 60 years old. The amount you can claim is up to Rs 25,000. In case the parents are senior citizens, the 2018 Budget increased the deduction sum to Rs 50,000, from Rs 30,000 in section 80D. If the parents are super senior citizens, the tax deductions one can avail of for their medical insurance is also Rs 50,000. In the case that both the taxpayer and the parent/s are above 60 years, the maximum deduction the section 80D offers is Rs 1 lakh.
An example will make this clearer. Rahul is a 38-year-old working individual, and his father is 63 years old. Rahul is a 38- year- old working individual, and his father is 63 years old. Rahul has opted for a medical cover for the two of them, and he pays insurance of Rs 30,000 for himself and Rs 35,000 for his father. What is the maximum amount that can be claimed by him for deduction under Section 80D? For the premium Rahul pays on his policy, he can claim up to Rs 25,000. Since his father is a senior citizen, up to Rs 50,000 can be claimed for his father for the policy taken. In Rahul’s case, the deduction will be Rs 25,000 and Rs 35,000 for the two of them. So, in a year, he can claim a total deduction of Rs 60,000 under section 80D.
In case of the demise of one of the insured parents, the other parent can continue to benefit from the same policy. You can claim the tax deduction based on the actual premium paid.
Deductions on Preventive Checkups
Section 80D tax deductions are also offered annually for preventive healthcare checkups. The maximum amount of deduction is capped at Rs. 5000 in one financial year. A person can claim this deduction for himself, spouse, dependent children or parents. The terms and conditions of Section 80D are revised regularly so that taxpayers can gain maximum benefits. A revision has now included the payment for preventive health checkups made through cash too. This is done to encourage people to take preventive health checkups more seriously. Regularly undergoing such tests aids in the early detection of problems, and can help prevent potential ailments and more significant medical bills.
Let’s understand this better with an example. Saurav has paid Rs 22,000 as a health insurance premium for his wife and dependent child. Additionally, he had a checkup and paid Rs 5000 for it. According to Section 80D, the maximum deduction he can avail is Rs 25,000, which includes both insurance and checkups. So, this will be divided as Rs 22,000 for the insurance premium he paid, and Rs 3,000 for the check-up. The deduction is Rs 3000 instead of the full amount since the overall deduction must be up to Rs 25,000 in this case.
Hindu Undivided Family
A Hindu Undivided Family comprises of all the people who have lineally descended from one common ancestor, along with the wives and unmarried daughters of the family’s male descendants. This method of creating a family unit saves taxes, as members can pool in assets under section 80D. Such a group has its own PAN card and is taxed separately, independent of the constituent members.
A section 80D deduction applies to Mediclaim taken in the name of any of its members. The deduction amount will be up to Rs 25,000 if the insured family member is less than 60 years old, and Rs 50,000 if the member is 60 years old or more.
Health Insurance Policies that Have a Single Premium
A new provision regarding the tax deduction for single premium health insurance policies was introduced in section 80D the Budget of 2018. Suppose that a taxpayer has made the payment of a lump sum amount in a year for a plan whose validly exceeds a year.
In that case, under this new provision, a deduction that is equivalent to the appropriate fraction of the policy amount can be claimed under Section 80D. The proper fraction that will be applicable is calculated by dividing the lump sum amount paid as premium, by the number of years of the policy. However, it is subjected to the upper limits of Rs 25,000 and Rs 50,000 depending on the case.
Let us look at the various eligible deductions of Section 80D in this table
| Scenario | Premium paid | Deduction under Section 80D | |
| Self, family, children | Parents | ||
| Individual + parents below 60 years | 25,000 | 25,000 | 50,000 |
| Individual and family below 60 years but senior citizen parents | 25,000 | 50,000 | 75,000 |
| Both individual and parents above 60 years | 50,000 | 50,000 | 1,00,000 |
| Members of Hindu Undivided Family | 25,000 | 25,000 | 25,000 |
| Non-resident individual | 25,000 | 25,000 | 25,000 |
Types of Payment Eligible for Benefit Under Section 80D
Payment of the medical insurance you opt for should be paid through online banking, debit card, credit card, demand draft, cheque and other similar methods. If the installments on the premium are made using cash, no tax deductions under section 80D can be availed. However, preventive health checkups you paid in cash are still eligible for tax deductions according to Section 80D.
Things to Keep in Mind
There are certain things about section 80D you should remember before you invest in a health insurance plan-
- The health insurance plan you contribute to have to be made to a scheme that is in accordance to the guidelines specified by the central government or approved by the Insurance Regulatory and Development Authority for it to be eligible for the section 80D deduction
- Payments can be made using any method except cash. Payments made using cash cannot avail tax deduction
- The term senior citizen refers to any individual resident of India who is 60 years or older, during that financial year for which you want to avail section 80D
- Claims for a deduction in tax cannot be applied for any premiums paid for the insurance that benefits a sibling, grandparent, aunt, uncle or any other relative
- If you and a parent make partial payments for medical insurance, according to section 80D, a tax deduction can be claimed by both. This will depend on the payment each of you has made
- You cannot show the service tax or the cess portion of the premium amount while applying for the deduction per section 80D
- Group health insurance that is provided by a company is not entitled to a deduction
- Tax deductions in section 80Dare available for medical insurance premiums that are offered by one’s employer as well as the ones paid for personally.
- Section 80Dtax deductions are applicable in the case of both individual health insurance and policies for the family
- Section 80Dlets you get tax benefits for unemployed children. A male child can be covered until he is 25 if he is unemployed. For a female child who is unemployed, tax benefits extend until her marriage. Premiums paid for the benefit of children who are working are not eligible for tax deductions
- If you want to maximise the tax benefit, either you or your spouse should buy health insurance for only their parents, instead of both the spouses insuring the whole family.
- Section 80D permits spouses to claim tax deductions for health insurance purchased for only parents and not in-laws.
- It does not make a difference whether your parents are financially dependent on you. The 80D tax deductions are available irrespective of that.
How Do You Avail Section 80D Deduction?
If you are a salaried individual who wants to avail the 80D tax deduction, you will have to submit the policy papers along with the payment slips of the premium to your employer. This will allow you to get the section 80D income tax return on your health insurance. Businesspeople can file their tax returns online. A frequently asked question concerning section 80D deduction is this- is an individual eligible for a tax deduction when the employer provides employee medical insurance which he deducts salary for? It can be answered in the following way-Individuals are eligible for the 80D tax deduction whenever they pay for the insurance themselves, even after the employer provides the individual and his family medical insurance.
Conclusion
We hope this detailed article has answered all your queries regarding section 80D deduction. Medical insurance is a must for every individual. It provides one with a sense of security and stability. Now, you can even save tax by providing medical insurance for yourself and your family.
