Medical Insurance Benefits Under Section 80D of ITA, 1961
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Section 80D of Income Tax Act of 1961 - Medical Insurance Deductions

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Section 80D of Income Tax Act of 1961 - Medical Insurance Deductions

The Income Tax Act, 1961, allows income tax deductions for individuals, which reduces the amount of tax payable. It is important to know about the relevant sections to make the most of these deductions.

What is Section 80D?

Section 80D of the Income Tax Act provides 80D deductions on the medical insurance premiums paid for you and your family members. You can claim a tax deduction for the health insurance premium paid for yourself, your parents, children, and your spouse.

Moreover, this section also allows Hindu Undivided Families (HUFs) to claim 80D deductions. If you wish to know how you will benefit from this section, read on to know more about Section 80D deductions and the tax deductions offered.

What investment comes under Section 80D?

  • The premiums you pay on a health insurance policy and the expense spent on preventive health checkups can be claimed as deductions under Section 80D of the Indian Income Tax Act.
  • Individuals can also claim deductions against the health insurance premium paid for their parents’ policies. The extent of deductions will depend upon the age of the primary policyholder.
  • Health-based riders such as critical illness cover available with life insurance plans also come under the purview of Section 80D of Income Tax.

Deductions as per Section 80D: Medical Expenditure Deduction

80D deductions are only connected with medical insurance policies. These deductions are mentioned as follows:

  • Individual and family
  • If you pay insurance premiums for yourself, your spouse, and your kids, you can claim a maximum tax deduction of ₹25,000 per annum. In the case of senior citizens, the limit is ₹50,000 a year.
  • If you pay health insurance premiums for your parents, you can claim a maximum tax benefit of ₹25,000 per year if your parents are less than the age of 60. However, if your parents are senior citizens, you can claim a tax benefit of up to ₹50,000 per year.

Preventive Health Check-up under Section 80D

In 2013-14, the government implemented a preventative health checkup deduction to encourage citizens to be more health-conscious. The goal of preventative health checkups is to detect any sickness and decrease risk factors early on by seeing a doctor on a regular basis. Payments for preventative health check-ups are deducted at a rate of ₹5,000 under Section 80D. This deduction is limited to ₹25,000/₹ 50,000, depending on the situation. Individuals can claim this deduction for themselves, their spouses, their dependent children, or their parents. Also, cash can be used to pay for preventive health screenings.

Additional 80D deduction

You are eligible to claim an additional 80D income tax deduction of ₹5,000 for the expenses associated with health check-ups. This includes all expenses for a check-up of the entire family.

What are the exclusions under Section 80D?

  • If you are making payments on your grandparents’, siblings’, or working children’s behalf, you cannot avail the tax benefits. This is applicable to any other relative not explicitly covered under your policy.
  • If you are making the health insurance premium payments through cash, you will not be eligible for health insurance tax benefits. Preventive health benefits can be availed even with cash payments.
  • If the company makes a group health insurance premium payment on the employee’s behalf (non-contributory), it won’t be eligible for tax exemption. However, if the taxpayers choose to make extra premium payments to improve the group cover (contributory), they can claim tax benefits on the additional amount they paid.
  • You will not be liable to receive any tax benefits on GST and Cess charges levied on premium payments.

Example:

Rohan is 45 years old, and his father is 75 years old. Rohan has taken out medical insurance for himself and his father, paying ₹30,000 and ₹35,000 in premiums, respectively. What is the maximum deduction he can claim under Section 80D?

Rohan is eligible for reimbursement of ₹25,000 for the premium he paid on his coverage. Rohan can claim ₹50,000 from his father’s senior citizen insurance policy. The deductions, in this case, are ₹25,000 and ₹35,000. As a result, he can claim a total deduction of ₹60,000 for the year.

Who is eligible for tax deductions under Section 80D?

You are eligible to claim a tax deduction under Section 80D for yourself, your spouse, your kids, and your parents. In addition, as mentioned above, even HUFs are eligible to claim a deduction in this section. Any member of a HUF can claim a tax deduction on the amount paid towards the health insurance premium. This deduction is subject to the upper limit according to Section 80D of the Income Tax Act.

Eligibility for tax deduction under section 80D of Income Tax Act,1961:

  • Individuals and HUF (Hindu Undivided Family) can file for a tax claim deduction from taxable income under Section 80D.
  • You will be eligible for a tax deduction under Section 80D if you make premium payments towards a health insurance policy bought for you, your spouse, children or parents.
  • If you are making the payments for the treatment or medical check-ups of your parents above the age of 80, you will be eligible for tax exemption. But, for these cases, you will need to make sure that your parents do not have a separate health insurance policy of their own.
  • All deductions are subject to the prevailing guidelines under Section 80D of the Income Tax Act.

Section 80D Limit

  • For self and family: ₹25,000 tax deduction + ₹5,000 health check-up, which sums up to ₹30,000.
  • For self, family, and parents: ₹50,000 tax deduction + ₹5,000 health check-up exemption, which sums up to ₹55,000
  • For self, family, and senior citizen parents: ₹75,000 tax deduction + ₹5,000 health check-up exemption, which takes the total tax deduction to ₹80,000
  • For self (senior citizen), family, and senior citizen parents: ₹1 lakh tax deduction + ₹5,000 health check-up exemption, which increases the deduction amount to ₹1.05 lakh

Deduction on Section 80D in Income Tax Act, 1961

A deduction in respect of medical insurance premium is allowed up to ₹25,000 per budgetary year for medical insurance premium instalments. The policy can be either for you, your spouse or your children. If you or your spouse is a senior citizen (60 years of age or above), then the deduction limit will go up to ₹50,000. If you make premium payments in cash, you will not be liable for tax exemptions.

Scenario

Premium paid

Preventive health checkup

Maximum deduction under 80D

Individual, children and family

Parents

Individual, children and family

Parents

Individual and parents(below 60)

2,500

500

500

500

50,000

Individual and parents(below 60) and parents above(60)

2,500

500

500

7,000

75,000

Individual and parents(below 60) and parents above(60)

2,500

500

500

7,000

75,000

HUF members

2,500

500

500

7,000

75,000

Non-residential member

2,500

500

500

7,000

75,000

Deductions on Preventive Health Care Checkups

You will be eligible for a tax reduction if you are getting health checkups done annually. The limit that you are eligible for under Section 80D will include the costs for checkups. The limit on check-up expenses is up to ₹5000 for individuals below 60 years of age and ₹7000 for senior citizens for each budgetary year.

Can HUFs also avail tax exemptions?

Akin to individual taxpayers, Hindu United Families (HUFs) are also allowed to claim tax exemptions for all or any members, under section 80D of the Income Tax Act. A HUF can claim a deduction under Section 80D for an insurance policy taken for a member of the family. The deduction amount will be ₹25,000 if the insured member is younger than 60 years of age. It will be ₹50,000 if the insured member is 60 years of age or above.

Deduction on Health Insurance Premium Payments for Parents

The premiums paid on a medical insurance policy for parents/guardians are qualified to deduce up to ₹25,000 in every financial year. If your mother/father/guardian is a senior citizen, the maximum limit goes up to ₹50,000 a year. The limit will additionally include ₹7000, for the expenses incurred through annual health checkups. For individuals who are super-senior citizens (80 years or above) and do not have an insurance policy can avail a tax deduction of up to ₹50,000 every financial year for annual medical checkups and hospital treatments. But, the tax exemption is not for their expenses.

No Tax Benefit on Cash Payment

A prerequisite for getting the tax benefits through these insurance policies is that you must make premium payments through a cheque, draft, credit or debit cards, online banking, etc. A tax benefit is not accessible for the premium payments made through cash. The only exception for tax exemption on cash payments is that preventive health checkups can be paid through cash.

Section 80D Deductions for FY 2020-21 & AY 2021-22

The Annual Budget for 2020-21 laid down the following limits for Section 80D deductions:

Covered Individuals

Premium paid for self, family, and children

Premium Paid for parents

80D Exemptions

Individual and parents > 60 years

25,000

25,000

50,000

Individual and family > 60 years but parents < 60 years

25,000

50,000

75,000

Individual, family, and parents < 60 years

50,000

50,000

1,00,000

HUF members and NR individuals

25,000

25,000

25,000

The reason behind deduction according to Section 80D

Mediclaim deductions under Section 80D happens so that the medical insurance policy remains active. The insurance policy can be in either your name or your spouse’s name. You must note that apart from saving taxes, a health insurance plan plays a pivotal role in taking care of your medical expenses if you fall sick and need medical assistance

Difference Between Section 80D and Section 80C

  • Under Section 80D, the taxpayers will be able to get tax exemptions for the health insurance policy. You can get a tax exemption on:
  • the policy bought for yourself, your family, your parents.

    expenses incurred because of annual health checkups.

    Premium paid towards health riders in life insurance policies.

  • Section 80C of the ITA will include many different tax-saving expenses and investments. Financial investments made in a wide range of investments like savings schemes, life insurance policies, ULIPs, ELSS, Sukanya Samriddhi Yojana, Tax-savings FDs, etc. will come under Section 80C.

Union Budget 2018: Increase in tax deduction limit according to Section 80D

As per the Union Budget announced in 2018, the maximum amount of deduction in health premium was raised from ₹30,000 to ₹50,000 under Section 80D. Senior citizens can avail of this benefit. One of the core objectives of the Union Budget 2018 was to take care of the senior citizens in India. Moreover, it is also modifications related to the medical expenditure incurred by individuals aged above 60 and below 80.

This rise in the tax deduction amount is a welcome change for senior citizens and for those who pay health insurance premiums for senior citizens.

FAQs on Section 80D

1.Can you make a cash payment for the premium paid for deductions?

It is not possible to claim a deduction on the premium amount paid in cash.

2. Is it possible to claim a deduction on the premium paid for your independent children?

No, deductions can only be claimed if you pay the premium for dependent children.

3.Can you claim a deduction if your spouse and parents are not dependent on you?

Yes, you can claim deductions even when your parents and spouse are independent.

4. Can you claim a deduction on the service tax paid on the insurance premium?

You cannot claim a deduction on the service tax amount because it is paid in addition to the premium and is collected by agencies.

5.Is it possible to claim deductions for health check-ups of dependents in your family?

Yes, you can claim a health check-up deduction up to ₹5,000 inclusive of all the dependents in your family. However, this facility is not available separately for every individual family member.

Now that you have a clear idea of what is 80D in income tax, you must ensure that you avail of the tax deduction in this section if you are paying health insurance premiums for yourself, your spouse, dependent children, and your parents

6. What is the limit of deduction under Section 80D of the Income Tax Act, 1961?

The breakdown of the deduction limits are as follows:

  • Individuals (below 60 years), with spouses and dependent children will get a deduction of up to ₹25,000 every year.
  • Individuals (above 60 years), with spouses and dependent children will get a deduction of up to ₹50,000 every year.
  • Individuals buying a separate policy for their dependent parents can claim an additional ₹25,000 if both the parents are below 60 years of age.
  • In case one of the parents is a senior citizen (above 60 years of age), the individuals can claim up to ₹50,000 as tax deduction.
  • Hindu Undivided Family (HUFs) can claim up to ₹25,000 every year and an additional ₹25,000 for a separate senior citizen policy.
  • Individuals can claim ₹5000 (below 60 years) or ₹7000 (above 60 years) as Preventive Health Checkup, subject to the total deduction falling under the above-mentioned limits.

7. How much tax exemption can be availed under 80D?

The Indian Income Tax Act lays down the various deductions available against the premium paid for health coverage under Section 80D. To get a better idea about the exemptions you can avail under this section, you can refer to the following:

a. An individual or an individual with family (spouse & dependent children) can avail a deduction of ₹25,000 per annum if the primary policyholder is below 60 years of age and ₹50,000 per annum if the primary policyholder is above 60 years of age.

b. An individual can also claim tax deductions on the policy premiums paid towards the health insurance of their dependent parents. If the parents are below the age of 60, the applicable deduction is ₹25,000 per annum. However, if the parents are above 60 years of age, the maximum deduction is ₹50,000 per annum.

c. HUFs (Hindu Undivided Family) can also claim tax deductions up to ₹25,000 per annum. Also, they can claim an additional ₹25,000 for a separate policy for the dependent parents.

d. NRIs get a tax deduction of ₹25,000 for their own health insurance, along with an additional ₹25,000 for parents’ health cover.

Thus, a resident Indian can claim up to ₹1,00,000 as a tax deduction per annum (both individual and parents are senior citizens) for the premiums paid against health insurance coverage

All of these limits are inclusive of the exemption for annual health checkups: ₹5000 for individuals and families and ₹7000 for senior citizens.

8. Can I avail tax benefits for more than one health insurance policy?

Yes, you are allowed to avail tax exemptions for multiple health insurance policies. You will need to make sure that you meet all eligibility conditions and the premium payments are up to date for all the insurance policies. If the claim amount is more extensive than the sum insured under the policy on which you have made the first claim, you will have the option to claim the balance amount from the second policy. You must keep this in mind at the time of filing under multiple policies.

- A Consumer Education Initiative series by Kotak Life

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