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Section 80D Deduction – All You Need To Know

Section 80D

Medical emergencies often crop up unexpectedly. It is better to stay prepared beforehand than regret later. The same holds true for health insurance. A necessity these days, health insurance should definitely feature in your investment portfolio. The Indian government encourages every individual to purchase health insurance and permits you to save on taxes under Section 80D.

Many people may have heard of tax deductions under Section 80D, but do not have a clear idea of the scheme. For those, here are some essential information regarding Section 80D deductions.

What is Section 80D?

Section 80D allows for tax deductions from the total taxable income for the payment of health insurance premium by an individual or the Hindu Undivided Family. Under Section 80D, taxpayers can claim a deduction from gross total income for medical insurance premiums, contribution to Central Government Health Scheme and preventive health check-up.

Income Tax Deduction for Medical Insurance

Health insurance can help taxpayers by reducing the treatment cost upon falling sick or sustaining an injury. Not only does medical insurance help you meet unexpected medical expenses but also helps save on tax under Section 80D.

• For individuals

If the insurance is purchased for the taxpayer, the spouse, or dependent children, a maximum amount of Rs. 25000 can be deducted. An additional deduction to the extent of Rs. 25000 for the insurance of parents under 60 years, and to the extent of Rs. 50000 for the parents above 60 years of age, is available.
If the age of both the taxpayer and the insured parent exceed 60 years, the maximum deduction that can be availed under Section 80D is to the extent of Rs. 1 lakh.

Let us take an example –

Rohan (45-year-old) has purchased medical covers for himself and his father (65-year-old). He pays Rs. 30000 and Rs. 35000 for each of the covers. So, Rohan can avail up to Rs. 25000 on tax deductions for the premium paid on his policy and up to Rs. 50000 for the policy against his father. Therefore, the total deductible amount is Rs. 60000.

• For Hindu Undivided Family (HUF)

A HUF can claim deduction under Section 80D for a mediclaim taken for any of the members of the Hindu Undivided Family. Rs. 25000 will be deducted if the insured is below 60 years of age, and Rs. 30000 will be deducted if the insured is above 60 years.

Preventive Health Check-up

Health insurance policy permits you to receive tax deductions under Section 80D of Income Tax Act for the expenses sustained for preventive health check-ups. You can avail Rs. 5000 for the costs incurred for a preventive health check-up for yourself, spouse, parents or children.

For preventive health check-ups, tax deduction comes as a bonus to the deduction available on the premiums. If you can save Rs. 20000 on taxes for the medical insurance premium payment, the policy will pay you Rs. 25000, i.e. an additional Rs. 5000 for preventive check-ups.

If you are paying for your elderly parents’ (aged 60 or above) preventive health check-ups, then you are entitled to receive a deduction of Rs. 7000 under Section 80D of ITA.

There are various approaches to availing tax deductions, depending on the policy premium paid for health insurance under ITA Section 80D. The whole process may seem complicated but if you are well aware of the nitty-gritty while filing a tax deduction claim, then the whole process will be a lot easier and hassle-free.

Essential Facts to Keep in Mind before Filing Tax Deduction Claim

Certain elements that are crucial to claim a tax deduction depending on the premium paid for health insurance are discussed below:

• First and foremost, the tax benefit is only provided for premiums paid for a health insurance policy
• Secondly, the premiums paid for medical insurance should belong to the taxpayer, the spouse, dependent parents or children. If your parents are senior citizens, then you are eligible for a higher deduction, up to Rs. 50000
• Payments made towards preventive health check-ups of the spouse, parents or children can be exempted from annual taxable income
• The amount offered as coverage under the tax benefit in terms of deductions for preventive health check-ups is restricted to Rs. 7000 for senior citizens and Rs. 5000 for an individual and family
• In case of premium payment for health insurance, the costs incurred will be eligible for tax benefit if the amount is paid through online/net banking, debit/credit card, demand draft or cheque

The condition has now changed, and preventive health check-up bills that are paid in cash are taken into consideration for tax deductions. All you need to keep in mind is that once you are done with the preventive health check-up, keep the payment receipt in place. You will have to submit the same when you file your income tax return.

To help you understand better, here is an illustration –

Suppose an individual pays health insurance premiums of Rs. 10000 for his/her own health and Rs. 29000 for his/her parents. The individual would be able to avail a deduction of Rs. 39000 – the sum total of premiums (Rs. 10000 + Rs. 29000).

Exclusions under Section 80D of Income Tax Act

Taxpayers are not entitled to receive tax benefits on STC (Service Tax and Cess) charges that are levied on the premium payment. A service tax of 14% is chargeable on the medical insurance premium payment.

Group health insurance policies are ineligible for tax exemptions under Section 80D of ITA. However, if taxpayers choose to pay the additional premium amount to enhance their group coverage, they can avail a deduction for the additional amount.