Section 80D

Buying medical coverage is one of the best investments that you can make to cover your medical expenses. If you are worried about paying the minute cost of your health insurance premium, imagine how you will manage to pay for expensive medical treatments in case of hospitalization. To encourage people to add medical coverage to their insurance portfolio, the government offers tax benefits on health insurance premiums under Section 80D of the Income Tax Act.

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    What is Section 80D of the Income Tax Act?

    Section 80D of the Income Tax Act, 1961 allows eligible taxpayers to avail tax deductions on the total premium paid towards health insurance in a financial year. It is available on regular health insurance premiums along with the premiums paid for top-up plans and critical illness plans. You can avail Section 80D deduction on premiums paid towards buying health insurance for self, spouse, dependent children and parents.

    Deduction Available under Section 80D of the Income Tax Act

    Under Section 80D, you are allowed to claim a tax deduction of up to Rs 25,000 per financial year on medical insurance premiums. This limit applies to the premium paid towards health insurance purchased for you, your spouse, and your dependent children.

    However, if either you or your spouse is a senior citizen (i.e. aged 60 years and above), then the 80D deduction limit goes up to Rs 50,000. Similarly, tax deductions for members of HUF (Hindu United Families) are Rs 25,000 and Rs 50,000 (previously Rs 30,000) if your age is less than 60 years and above 60 years respectively.

    Deduction under Section 80D for Health Insurance Premium Paid for Parents

    The medical insurance premium paid for parents additionally qualifies for the Section 80D deduction of up to Rs 25,000 every financial year. But if both your father and mother or either of them is a senior citizen, then the maximum tax rebate limit goes up to Rs 50,000 in a financial year.

    So besides availing tax deductions of Rs 25,000 on health insurance premiums paid towards yourself, your spouse and your children, you can also get a tax rebate of Rs 50,000 on premiums paid for your parents, who are senior citizens. Thus, you can avail a total tax rebate of Rs 75,000 if you pay health insurance premiums for your family including your senior citizen parents

    Take a look at the following table to understand the tax deductions available to an individual under Section 80D of the Income Tax Act as of FY 2020-21 and 2021-22: 

    Covered Individuals

    Premium Paid (Rs)

    Tax Exemption u/s 80D (Rs)

    For Self, Family, & Children

    For Parents

    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

    Both individual, family and parents < 60 years

    50,000

    50,000

    1,00,000

    Members of HUF & Non-resident Individual

    25,000

    25,000

    25,000

    Remember: The premiums paid for health insurance availed by your siblings are not qualified for tax benefits.

    Deduction on Preventive Healthcare Check-ups under Section 80D

    You can get tax deductions on the cost of preventive health check-ups annually under Section 80D of the Income Tax Act. It was introduced by the government to encourage people to get preventive health check-ups done regularly for timely deduction of an illness or health condition. You can avail this tax benefit on the payment made towards the preventive health check-up undertaken for yourself, your spouse, children and parents.

    You can claim a preventive health check-up deduction for up to Rs 5,000 per financial year under Section 80D. This preventive health check-up deduction is included within the aforementioned 80D limit of Rs 25,000 for individuals and Rs 50,000 for senior citizens. 

    No Tax Benefits on Cash Payment

    Medical insurance premiums should be paid through non-cash modes to be eligible for Section 80D deductions of the Incomes Tax Act. You can pay the premium through online banking, cheque, demand draft, debit or credit cards, etc. Section 80D deduction is not accessible on cash payment of the premium.

    However, this condition does not apply to the payment for preventive health check-ups under Income Tax Act. You can avail preventive health check-up deduction on tax even if the payment was made in cash.

    How Much Tax Deduction under Section 80D Can You Avail?

    Let us understand the Section 80D deduction limit with the help of an example:

    Suppose you have a family of six members i.e. self (35), spouse (34), two children (11 and 7), father (63), and mother (59). You have purchased a family floater health insurance plan that covers you, your spouse, and your children for a yearly premium of Rs 15,000. Moreover, you have paid a yearly premium of Rs 30,000 for your parent's medical insurance. You have also paid Rs 15,000 for your health check-up and Rs 10,000 for your parents’ health check-up. 

    Now, check out the table below to understand the total deduction under sec 80D of the Income Tax Act:

    Expenses

    Actual Expense

    Maximum Deduction under Section 80D

    Deduction Applicable

    Health Insurance Premium for You, Your Spouse, & Children

    Rs 15,000

    Rs 25,000

    Rs 15,000

    Preventive Health Checkup for Self, Spouse, Children

    Rs 15,000

    Rs 5,000

    Rs 5,000

    Total Expense for Self, Spouse, & Children

    Rs 30,000

    Rs 25,000

    Rs 20,000

    Health Insurance Premium for Senior Citizens

    Rs 30,000

    Rs 50,000

    Rs 30,000

    Preventive Health Check Up for Parents (Senior Citizens)

    Rs 10,000

    Rs 5,000

    Rs 5,000

    Total For Parents (Senior Citizens)

    Rs 40,000

    Rs 50,000

    Rs 35,000

    Total Deduction Available for the Year

     

     

    Rs 55,000

    So, while the total expenses were of Rs 70,000 for health insurance premiums, you will receive a maximum Section 80D deduction of Rs 55,000 for the given financial year.

    Deduction under Section 80D for Super Senior Citizens

    Section 80D of the Income Tax Act also has a provision for super senior citizens of age 80 years or more. As per Income Tax Section 80D, super senior citizens who don’t have any health insurance policy can also claim a deduction of up to Rs 50,000 every financial year towards medical check-ups and treatments. However, this 80D deduction does not apply to their own expenses.

    Let us understand with the help of an example. Suppose you are 60 years old and have paid an annual health insurance premium of Rs 30,000 for your dependents and yourself. You are also paying a premium of Rs 35,000 for your parents’ health policy, who are super senior citizens, i.e. of 80 years of age. So, under section 80D of the Income Tax Act, you can avail of the following benefits:

    • Tax benefit of Rs 30,000 on the health insurance premium of Rs 30,000 paid for your dependents and yourself.
    • Tax benefits of Rs 35,000 on the cost of medical treatments and health check-ups of Rs 35,000 for your parents, who are super senior citizens.
    • All in all, a tax deduction of Rs 65,000 can be claimed under Section 80D of the Income Tax Act, 1961.

    Deduction under Section 80DDB (Treatment of Specified Illnesses)

    You can also avail tax deduction under 80DDB on the medical expenses incurred towards the treatment of specified diseases or illnesses. If your age is below 60 years, you can get a deduction of up to Rs 40,000 on the treatment cost of specified illnesses per financial year. But for senior citizens and super senior citizens, the section 80D medical expenditure deduction limit is of Rs 1 lakh for the medical treatment expenses incurred on specific ailments in a financial year.

    Cancer, chronic renal failure, Parkinson’s disease, AIDS, etc. are some of the diseases whose treatment costs are eligible for tax deduction under Sec 80DDB. You can get the complete list of such diseases by referring to Rule 11DD. You can claim the treatment cost of these diseases for yourself, your spouse, parents, children, and siblings.

    However, you need to attach an endorsement from a specialist as proof of availing the treatment for the specified disease while filing the income tax forms.

    Deduction under Section 80DD of the Income Tax Act (Treatment of a Dependent with Disability)

    Under Section 80DD, you can get a tax deduction on the medical expenses incurred on the treatment of a dependent with a disability. It includes the medical expenses incurred for nursing, training, treatment, preservation, and rehabilitation of a dependent with some disability. Dependents can be either of your parent, children, your spouse, or siblings. 

    You can avail tax benefits of up to Rs 75,000 on the treatment of a disabled dependent in case of 40% & more disability and Rs 1.25 lakh for major disabilities of 70% & above per financial year. However, you need to submit a supporting medical certificate stating the disability at the time of filing income tax returns. Make sure that the medical certificate has been issued by the central or state medical board of the government.

    Deduction under Section 80U (Person with Disability)

    Section 80U of the Income Tax Act provides deduction to people suffering from a disability. As per this section, individuals suffering from a disability of at least 40% can claim tax benefits of Rs 75,000 per financial year. In case of severe disability of 80% and more, the deduction limit increases up to Rs 1.25 lakh for each financial year. This is no other relation to the treatment costs.

    Deduction on Medical Reimbursement/Allowance under Section 17 of the Income Tax Act

    Under Section 17 of the Income Tax Act, you can get a deduction on any medical expenditures paid by your employer for the treatment of your family or yourself. The sum paid by your employer as part of your salary towards the treatment cost of an ailment of your family (self, spouse, children, siblings, and dependent parents) is excluded from income tax, which is up to a limit of Rs 40,000 per financial year. This deduction limit replaces both medical reimbursement and transport allowance.

    However, the sum paid by your employer as a medical allowance towards the cost for the medical treatment of your family (self, life partner, kids, dependent guardians, and siblings) is excluded from tax benefits and is fully taxable.

    Deductions Available under Section 80D and Section 80C

    Section 80D of the Income Tax Act is often puzzled by its more visible partner, i.e. Section 80C. Just like Section 80D of the Indian Income Tax Act 1961, Section 80C also allows you to save taxes. However, the upper limit to save taxes under Section 80C is greater as compared to Section 80D. While Section 80C offers tax deduction up to Rs 1.5 lakh per year, Section 80D offers tax benefits up to Rs 1 lakh.

    Moreover, Section 80C incorporates investments made in an extensive range of financial instruments, such as small savings schemes, mutual funds, life insurance premiums, etc., whereas Section 80D is meant entirely for deductions on the paid health insurance premiums.

    Difference between Section 80D and Section 80C

    A lot of people remain confused between Section 80D and Section 80C. Here are the basic differences between Section 80C and Section 80D deductions:

    Categories

    Section 80C

    Section 80D

    Meaning

    Section 80C offers tax deductions on different types of tax-saving investments, such as ULIP, PPF, ELSS, EPF, LIC premium, etc.

    Section 80D deduction is allowed for availing tax exemptions on health insurance premiums paid for self, family, & parents and expenses incurred on preventive health check-ups.

    Maximum Tax Deduction Limit

    Up to Rs 1.5 lakh

    Up to Rs 1 lakh

    Scope of Tax Benefits

    Higher tax benefits

    Lower tax benefits

    Exclusions under Section 80D of the Income Tax Act

    Take a look at the exclusions under Section 80D of the Income Tax Act:

    • Mode of Premium Payments: To get tax benefits under section 80D, only the taxpayer should pay health insurance premiums. If the premium is paid by a third party, then the taxpayer will not be eligible for deduction u/s 80D. Moreover, if the premium payments are paid in cash, taxpayers will not be eligible for tax benefits.
    • Service Tax: Tax payers are not liable to receive any tax benefits on the service tax and cess charges levied on the premium payment. For the unversed, service tax is chargeable on the health insurance premium and the amount payable is equivalent to 14% of the health insurance premium.
    • Group Health Insurance: Group health insurance policies do not attract any tax benefits under Section 80D, Income Tax Act. However, if taxpayers choose to enhance their group cover by paying an extra premium amount, then they can claim a deduction u/s 80D for the extra amount.

    FAQs on Section 80D

    Written By: PolicyBazaar

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