Understand the Section 80D better
What is Section 80D?
Section 80D of the Income Tax Act deals with tax benefits available on the amount a taxpayer pays as the premium for health insurance cover. The deductions are also available on health top ups, super top up health insurance and critical illness covers.
In India, less than one-fifth of the population has health insurance cover. The bulk of the healthcare cost in India is met out of savings or borrowings. The government provides the tax benefit so that citizens are encouraged to buy health insurance and protect themselves from financial distress because of unanticipated hospitalisation expenses.
As per the Income Tax Department, Government of India, the deduction in respect of medical insurance premium under Section 80D is described below:
Deduction in Respect of Medical Insurance Premium [Section 80D]
As per section 80D, an individual or a HUF can claim deduction in respect of the following payments:
- Medical insurance premium paid by assessee, being individual/HUF by any mode other than cash.
- Any contribution made by assessee, being individual to Central Government Health Scheme or such other Scheme as may be notified by the Central Government.
- Sum paid by assessee, being individual on account of preventive health check-up. Medical expenditure incurred by assessee, being individual/HUF on the health of a very senior citizen person provided that no amount has been paid to effect or to keep in force an insurance on the health of such person.
Policy to Be Taken or Expenditure to Be Incurred in Whose Name?
In case of an individual, deduction is available in respect of medical insurance policy taken in his own name, or in the name his/her spouse, his/her parents and his/her dependent children. In case of HUF, the policy can be taken on the health of any member of such HUF.
Deduction on account of medical expenditure shall be allowed only when it is incurred on the health of the aforementioned persons who are very senior citizens. Very senior citizen’ means an individual resident in India who is of the age of eighty years or more at any time during the relevant previous year.
Amount of Deduction
In case of an individual, amount of deduction cannot exceed:
- ₹25,000, in aggregate, in respect of medical insurance premium or any payment made for preventive health check-up (*). [This deduction is available if payment is made for benefit of assessee, himself or his/her spouse or dependent children]
- ₹25,000, in aggregate, in respect of medical insurance premium or any payment made for preventive health check-up (*). [This deduction is available if payment is made for benefit of parents of assessee.]
- ₹25,000 in aggregate in respect of contribution made to the Central Government Health Scheme or any scheme notified by the Central Government [This deduction is available if payment is made for benefit of assessee, himself, his/her spouse or dependent children]
- ₹30,000 in aggregate in respect of medical expenditure incurred on the health of assessee, himself, his/her spouse or dependent children or parents. [This deduction is available if amount is paid for benefit of a very senior citizen and no amount has been paid to effect or to keep in force insurance on the health of such person.]
(*) total amount of deduction for the expenditure incurred on preventive health check-up of assessee, his family and parents could not exceed ₹5,000.
Note: In aforesaid clauses a, b and c additional deduction of ₹5,000 is available when medical insurance is taken on the life of senior citizen.
Deduction in Respect of Expenditure on Training/Medical Treatment of a Dependent, Being a person with Disability [Section 80DD]
A resident individual/HUF, incurring expenditure on maintenance of relative dependent, being a person with disability, can claim deduction under section 80DD. Deduction is available in respect of any of the following:
- Expenditure incurred on medical treatment (including nursing), training, rehabilitation of a dependent person with disability.
- Amount paid or deposited under a scheme of LIC or any other insurer or UTI or specified company duly approved by the Board, for maintenance of dependent person with disability.
Other Points to Be Kept in Mind
Following important points should be kept in mind while claiming deduction under section 80DD:
- The taxpayer should obtain a copy of certificate (Form No. 10-IA) issued by the medical authority (fresh certificate is required in case of reassessment of disability after the expiry of the period mentioned in original certificate).
- If the dependent predeceases the taxpayer or the member of HUF referred to above, then amount paid or deposited in (b) above, shall be charged to tax in the hands of the taxpayer for the previous year in which such sum is received.
Deduction in Respect of Expenditure on Medical Treatment of Specified Diseases [Section 80DDB]
As per section 80DDB, a taxpayer can claim deduction in respect of expenditure incurred by him on medical treatment of specified diseases. The provisions in this regard are as follows:
- Deduction under section 80DDB can be claimed by an individual or a HUF, who is resident in India.
- Deduction is available in respect of amount actually paid by the taxpayer on medical treatment of specified disease or ailment (prescribed by the Board, see rule 11DD for prescribed disease or ailment).
- In case of an individual, the aforesaid expenditure should be incurred on medical treatment of an individual or wholly/mainly dependent spouse, children, parents, brothers and sisters of the individual; and
- In case of a HUF, expenditure should be incurred on the medical treatment of any member of the family, who is wholly/mainly dependent on such HUF.
The taxpayer has to obtain the prescription for the medical treatment from a neurologist, an oncologist, a urologist, a haematologist, an immunologist or such other specialist, as may be prescribed.
Amount of Deduction
Amount of deduction will be lower of the following:
- Amount actually paid on medical treatment specified above; or
- ₹40,000
However, the limit of ₹40,000 will be increased to ₹60,000, if the expenditure is incurred on medical treatment of a senior citizen (i.e., any resident individual of age of 60 years or above but less than 80 years and to ₹80,000 if the expenditure is incurred on the medical treatment of super senior citizen i.e. resident individual of the age of 80 years or above).
Other Points to Be Kept in Mind
Following important points should be kept in mind while claiming deduction under section 80DDB:
- The taxpayer should obtain a copy of certificate (Form No. 10-I) issued by a neurologist, an oncologist, a urologist, a haematologist, an immunologist or such other specialist, as may be prescribed, working in a Government hospital.
- From the amount of deduction computed in aforesaid manner, amount, if any, received by the taxpayer from any insurer or from his employer, by way of reimbursement for such expenditure shall be deducted.
How Do I Avail The Exemptions?
The insurance premium is the amount paid to an insurance company, which in return promises to pay the insured expenses on any hospitalisation, subject to the coverage limit and sub-limits.
The amount paid as health insurance premium is deducted from total income for calculating income tax liability.
What Are the Deductions Allowed for Health Insurance Under Section 80D?
Health insurance availed for self, spouse, and dependent children:
- Up to ₹25,000 per year if the taxpayer is less than 60 years
- Up to ₹30,000 per year if the taxpayer is 60 years and above
Insurance availed for parents:
- Additional deduction up to ₹25,000 per year if parents are below 60 years
- Additional deduction up to ₹30,000 per year if parents are 60 years and above
The above mentioned tax deductions can also be availed for health top-ups, super top-ups and critical illness covers under Section 80D of the Income Tax Act.
Are There Additional Deductions Besides the Above?
Expenses up to ₹5,000 on preventive health check-ups are also allowed as deductions. This, however, is not an additional deduction. The expenses on preventive health check-ups are included in the overall ceiling for health insurance deductions.
If a taxpayer pays ₹22,000 as annual premium for health insurance and spends an additional ₹ 5,000 on preventive health check-ups, the total deduction allowed under Section 80D will be ₹25,000, which is the maximum deduction allowed for health insurance.
If the taxpayer is a senior citizen (60 years and above), the total deduction allowed will be the entire amount of ₹27,000. The maximum deduction allowed for a taxpayer who is 60 years and above is ₹30,000.
Similarly, the preventive health check-up costs are included in the overall ceilings for health insurance for parents. The deductions allowed for individual taxpayers are also applicable to Hindu undivided families (HUF).
Are There Any Conditions/Exclusions I Should Know Of?
- A taxpayer cannot claim the deduction for health insurance cover he/she purchases for children who are not dependent and are working, but can claim the benefit even if the spouse and parents are not dependent.
- An inconspicuous but important provision in Section 80D is that the premium for health insurance cannot be paid in cash if tax benefit is to be claimed. For claiming tax benefit, the premium has to be paid by cheque, internet banking, or a credit/debit card.
- The tax benefit on health insurance is in addition to other tax benefits available under various other sections, including ₹1.5 lakh under Section 80C.
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