Section 80D Deductions for Medical Insurance

It is an undeniable truth that good health is synonymous with wealth. In today’s fast-paced life, health often gets neglected, and it is not until a medical emergency strikes that we realise the importance of being healthy. Medical expenses are skyrocketing, and paying for them can be financially draining. That is where health insurance comes in. Health insurance ensures you are not burdened with hefty medical bills and keeps you financially covered. The government encourages citizens to invest in medical policies by providing tax benefits under Income Tax Act’s Section 80D. In this article, we will delve into this Section’s provisions and comprehend the benefits it offers.

What is section 80D of the income tax act?

Section 80D of the Income Tax Act is a provision that allows taxpayers to claim a deduction on the amount paid towards health insurance premiums and medical expenses for themselves, their spouse, and dependent children or parents. The deduction limit varies based on the individual’s age and the type of policy purchased. This Section provides an additional deduction under the name of preventive health check-ups.

Deduction available under section 80D of the income tax act

• If you are under 60 years of age and have paid health insurance premiums for yourself, the eligible limit for tax exemption is Rs 25,000.

• If you have paid health insurance premiums for yourself, your spouse, and dependent children who are all under the age of 60, the eligible limit is Rs 25,000.

• If you have paid health insurance premiums for yourself and your parents, and all of you are below 60 years of age, the eligible deduction will be Rs 50,000 (Rs 25,000 for your parents and the same amount for yourself).

• If you have purchased health insurance premiums for yourself, and you are below 60 years of age and also bought insurance for your parents who are above 60 years of age, the eligible limit is Rs 75,000 (Rs 25,000 for yourself and Rs 50,000 for your parents).

• If you have purchased a policy for both yourself and your parents, and all of you are above 60, the eligible limit is Rs 1,00,000.

Deduction under section 80D for health insurance premium paid for parents

The deduction available under Section 80D for health insurance premiums paid for parents depends on the age of the parents and the premium paid. The table below provides the details of the deduction:

Mr X is 35 years old, and during the financial year 2022-23, he paid a health insurance premium of Rs 60,000 for his 60-year-old father. He also incurred expenses of Rs 35,000 for a premium for himself during the same period. The maximum deduction he could claim in this case would be:

Deduction on preventive healthcare check-ups under section 80D

• Under Section 80D of the Income Tax Act, individuals can claim deductions on preventive health check-ups up to a maximum limit of Rs 5,000 per year. This benefit is for all, irrespective of their age.

• Preventive health check-ups refer to medical tests and examinations carried out to identify any health issues before they become severe. Such tests include routine blood tests, urine tests, X-rays, and other scans.

• It is essential to note that the maximum deduction limit available under this Section is Rs 5,000, and any amount exceeding this limit is not eligible for tax benefits.

For example, if an individual incurs an expense of Rs 4,000 on a preventive health check-up for himself/herself or his/her family members, the person can claim a deduction of Rs 4,000 under Section 80D. However, if a person incurs an expense higher than Rs 5,000, he/she would not be able to avail of any benefit for the amount that exceeds Rs 5,000.

Deduction under section 80D for senior citizens

Section 80D deduction enables senior citizens (aged 60 years or above) to claim a higher deduction limit for their medical coverage premiums paid for themselves, their husband/wife, dependent children, and parents, as well as expenses incurred on preventive health check-ups. The deduction limit for Mediclaim premiums paid for self and family cannot exceed Rs 50,000; the same applies to the premiums paid for parents. Additionally, the deduction cap for preventive health check-ups is Rs 5,000.

Let's consider the example of Mr Sharma, a senior citizen aged 65 years. Mr Sharma pays an annual premium of Rs 45,000 for a health insurance policy covering himself and his spouse. He also pays Rs 35,000 annually for his parent’s health insurance policy. Additionally, he incurs Rs 3,000 towards preventive health check-ups.

To calculate the deduction available to Mr Sharma under Section 80D, we can use the following table:

Deduction under section 80DDB (treatment of specified illnesses)

• Section 80DDB provides a deduction for expenses incurred towards the treatment of specified illnesses for the taxpayer and their dependents.
• The benefit extends to individuals, HUFs, and senior citizens.
• The specified illnesses for which the deduction is available are neurological diseases, malignant cancers, chronic renal failure, haematological disorders, and certain other specified diseases mentioned in rule 11DD.
• The tax benefit for senior citizens is Rs 1,00,000, while for other taxpayers aged below 60, it is Rs 40,000. 

For instance, if a taxpayer incurs an expense of Rs 80,000 towards specified illness treatment, the person can claim a deduction of Rs 40,000 under Section 80DDB while filing his/her income tax returns. Similarly, if a senior citizen incurs an expense of Rs 1,50,000 towards specified illness treatment, he/she can claim a deduction of Rs 1,00,000 under Section 80DDB.

Deduction under section 80DD of the income tax act (treatment of a dependent with disability)

• Section 80DD provides a deduction to taxpayers who incur expenses for the rehabilitation, medical treatment, or maintenance of a dependent with a disability.
• The benefit is available to individuals who are residents of India and have a dependent with a disability, including spouse, children, parents, brothers and sisters.
• The deduction amount varies depending on the extent of disability of the dependent, as certified by a medical authority.
• The deduction capping for severe disability is Rs 1,25,000 and up to Rs 75,000 for a non-sever disability.
• A severe disability is defined as a disability with at least 80% disability or more, while any other disability is considered a non-severe disability.
• To claim this deduction, a taxpayer must provide a certificate from a medical authority stating the extent of the disability of the dependent.
• One should renew the certificate, usually every five years.

How much tax deduction under section 80D can you avail?

Here are a few examples to illustrate the calculation of the deduction under Section 80D for different categories:

• Example 1:

Mr A, who is 35 years old, pays a health insurance premium of Rs 18,000 for himself, Rs 20,000 for his wife, and Rs 22,000 for his dependent children. The maximum deduction available to him under Section 80D would be Rs 65,000 (Rs 25,000 + Rs 25,000 + Rs 15,000).

• Example 2:

Mr B, who is 62 years old, pays a health insurance premium of Rs 55,000 for himself and Rs 30,000 for his wife, who is 57 years old. The maximum deduction available to him under Section 80D would be Rs 80,000 (Rs 50,000 + Rs 30,000).

• Example 3:

Mr C, who is 85 years old, pays a health insurance premium of Rs 1,25,000 for himself. The maximum claim he is eligible for under Section 80D would be Rs 1,00,000.

Exclusions under Section 80D of the Income Tax Act

The table below shows when the deduction is applicable and when it is not.

While paying premiums, it is important to note that one cannot claim tax benefits on the payment made towards service tax or cess under Section 80D of the Income Tax Act.

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

• Avoid investing solely to save on premiums. If the cost of coverage exceeds the ceiling limit, it’s still worth investing in.
  
  

• Make sure to examine the policy exclusions and limitations thoroughly. Review whether the insurer provides coverage for pre-existing conditions and, if they do, scrutinise the waiting period for it.
  
  

• It is essential to compare the network hospitals of different insurers. If an insurer doesn’t have cashless hospitals in your city, purchasing a policy from them would be pointless.

• Verify the claim settlement ratio before choosing an insurer. Opting for an insurer with a poor reputation for settling claims may seem advantageous initially due to lower premiums, but it can lead to significant disappointment in the long term.

To claim tax benefits under Section 80D, keeping all the receipts and documents related to the medical insurance policy is essential. The receipts must highlight the premium paid, insurance details, and the policy’s tenure.

Frequently Asked Questions on Section 80D

What documents are needed for preventive health check-up tax deduction under Section 80D?

When filing a deduction for a preventive check-up, no documentation is required. However, documentation is necessary if the Income Tax Department suspects the claim is fraudulent.

• Keep receipts or bills issued by the diagnostic centre or hospital where you have undergone the check-up. These receipts must include the date of the check-up, the name of the person who underwent the check-up, and the amount paid.
• Keep a report issued by the diagnostic centre/hospital conducting the check-up. This report should contain details of the check-up, including the tests performed, their results, and any recommendations made by the doctor.
• If needed, a copy of the payment receipt or proof of payment for the health insurance policy premium.

How to claim a deduction under section 80D?

You must follow the steps below to claim under this Section. 

• Firstly, you need to purchase a health insurance policy. Make sure to retain the policy document as proof of purchase.
• Determine the premium paid towards the policy. The eligible amount of deduction gets calculated based on the premium amount paid.
• Claim the eligible deduction while filing your Income Tax Return (ITR). Ensure that you have entered the correct amount of deduction under Section 80D while filing the ITR.
• Keep the necessary documents ready while filing the ITR. These documents include the policy document and premium receipts.
• Fill out the appropriate sections of the ITR form.
• Ensure that you retain the necessary documents for future reference. 

What is the maximum deduction under Section 80D?

The deduction limit under Section 80D varies with age and policy type. Individuals are eligible for the tax advantage of up to Rs 25,000 per fiscal year for insurance premiums paid for themselves, their spouses, and dependent children. Furthermore, they can claim an extra deduction of Rs 25,000 for the premiums paid towards their parents’ medical coverage. For parents (aged over 60 years), the tax deduction cap rises to Rs 50,000.

Can HUFs also avail of tax exemptions under Section 80D?

HUFs are eligible for a maximum deduction limit of Rs 25,000 per fiscal year for the medical insurance premiums paid for any family member. Moreover, an extra deduction of Rs 25,000 is available for premiums paid for the medical insurance of a senior citizen family member.