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Section 80D of ITA: Deductions for Medical Insurance and Preventive Health Checkups

Section 80D of Income Tax Act allows you to avail tax deductions, based on the premiums paid for medical insurance or health check-ups for your family, including your spouse, children, and dependent parents. To ensure the wellbeing of a taxpayer and motivate people to live a healthy life, Income Tax Act of India keeps revising the norms after a certain period of time. As per a recent revision of income tax norm under section 80D, if super senior citizens (80 years and above) who do not have senior citizen health insurance and are dependent on any of their children, then he or she who pays the premium shall be allowed to avail a tax deduction of Rs. 50,000 (max).

Health or Medical Insurance is essential for everyone, as it provides financial help and assurance of a fearless life ahead. We can better understand the importance of a health insurance policy considering the rising cost of medical facilities in our country. Also, it is important to have adequate medical coverage because the cost of medical treatment without any health insurance policy may wipe out your savings completely.

Having sufficient coverage will help you and your family avoid a financial crisis during a medical emergency, such as critical illnesses or the treatment for severe bodily injuries due to an accident. Before mentioning the details of Tax Deduction under Section 80D of Income Tax Act, we would like you to check the important features of a health insurance policy:

Cashless Hospitalization Facility

Along with multiple features like coverage for critical illnesses and pre-existing diseases, a health insurance policy offers various other benefits too. Cashless hospitalization is one of those benefits, which is offered by almost every health insurance policy. Insurance companies have network hospitals where you can avail the treatment for any illness or injury covered by the policy. Also, the procedure to avail cashless hospitalization is very simple and easy.

Ambulance Expenses

This is one of the best benefits offered under a health insurance policy. It covers all or a share of the ambulance expenses at the time of a medical emergency.

Pre and Post Hospitalization Expenses

Apart from hospitalization bills, any expenses incurred before and after hospitalization are also part of medical coverage. A health insurance policy considers this cost as a liability. Insurance providers bear the cost incurred by the insured before and after hospitalization.

Tax Deduction under Medical Insurance

Let’s consider the below table to know the deductions under Section 80D of Income Tax Act

Scenario       Premium Paid Tax Deduction
Self, family, children Parents  
Individual and parents under the age 60 years 25,000 25,000 50,000
Individual/family below 60 years and parents above 60 years 25,000 50,000 75,000
Individual/family and parents above 60 years 50,000 50,000 1,00,000
HUF member 25,000 25,000 25,000
NRIs 25,000 25,000 25,000

*The above mentioned rates are subject to change as per the prevailing income tax slab

As per the financial year 2019-20, the maximum deduction to be claimed for health insurance premium paid towards self, family or parents under the age 60 years is Rs. 50,000. When family or individual is below 60 but parents are above 60, a deduction of Rs. 75,000 to be claimed.  Maximum of Rs. 1,00,000 can be claimed in case both individual/ family and parents are above 60 years old. The deduction limit for both HUF and NRIs is stable at Rs. 25,000.

Tax Deduction under Medical Insurance: Things to Know

  • You can avail a tax deduction on the premium paid for medical insurance provided by your employer as well as on a standalone policy taken by you. Tax deductions are applied to both individual health insurance and family floater policies.
  • You are eligible to avail tax deduction only if the premium amount is paid through a payment mode other than cash. You can pay through different payment modes, i.e. a Credit card, Debit card, or Internet Banking.
  • You can take a medical insurance plan for your dependent children, which is also eligible for tax deductions if they are below 18 years and unemployed too. In case a male child is unemployed, he can be covered for up to 25 years, whereas a female child who is unemployed can be covered as long as she is unmarried.
  • If you are paying medical insurance premiums for your dependent parents, you are eligible for tax deductions.
  • If you are paying medical insurance premiums for your siblings, no tax deduction can be claimed.

Tax Deductions Allowed for Preventive Health Check-up

A medical insurance policy allows you to avail tax deduction under Section 80D of Income Tax Act for any expenses incurred for preventive health check-ups. You can avail Rs. 5,000 for the cost incurred for preventive health check-ups for self, spouse, children or parents.

Note: The tax deduction for preventive health check-ups is in addition to the deduction available on the premium payment.

This means, if you are eligible to avail Rs. 20,000 as a tax deduction for the premium payment of medical insurance, the policy will pay Rs. 25,000, i.e. 5000 extra for preventive health check-ups.

In case you pay for the preventive health check-ups of your parents who are 60 years or above, you are eligible to avail Rs. 7,000 as the tax deduction under Section 80D of Income Tax Act, 1961.

 Things to Know before Claiming Tax Deduction under Section 80D

Various Elements

Different elements that are important to avail a tax deduction based on the premium paid for medical insurance are described below.

  • The benefit is provided only for the premium paid for a medical insurance policy. This is the primary factor and is mandatory to avail the tax benefit.
  • The second major thing to avail a tax deduction is the premium paid for a medical insurance policy should belong to you, your spouse, dependent children or parents.
  • In case any of your parents is a senior citizen, you can avail a higher deduction, i.e. up to Rs. 50,000.

Preventive Check-ups

One of the additional benefits offered under Section 80D of Income Tax Act is that expenses borne by you for preventive health check-ups of your spouse, children or parents can be exempted from your annual taxable income. Even the expense incurred for the preventive health check-ups of the parents are exempted from tax.

Amount

The amount offered as the coverage under this benefit in terms of the deduction for preventive health check-ups is restricted to Rs. 5,000 for an individual and the family and Rs. 7000 for senior citizen parents.

Cash Benefit

The second difference that can be noticed regarding preventive health check-ups is that the premium paid for the health insurance coverage. In case of the premium payment for medical insurance, the expenses incurred will be eligible for the tax benefit only if the amount is paid other than cash. So, this would include a wide range payment modes including cheque, credit cards, debit cards and even direct transfer from the bank account through net banking mode.

The terms and conditions under Section 80D of Income Tax Act change periodically for the welfare of taxpayers, who have health insurance. This condition now has changed and the bills paid against preventive health check-ups in cash are considered for the tax deduction. This change has been brought to ensure that people can invest in preventive health check-ups to stay healthy and fit. The only thing you need to take care after you are done with the preventive health check-ups is to make sure you keep the payment receipt, which is mandatory to submit when you file your income tax return.

Let us take an example of Section 80D for your better understanding.

Suppose an individual pays medical insurance premium during a financial year as given below:

  1. 14,000 as insurance policy premium for his own health
  2. 29,000 as insurance policy premium for his parents

In the above-mentioned scenario, an individual would be allowed to avail a deduction of Rs. 39,000, which is the sum of total premium paid by Rs. 14,000 and Rs. 29,000 when neither of the parents is a senior citizen. However, in case any of their parents is a senior citizen, they would be allowed to avail tax a deduction of Rs. 43,000.

How to Get Tax Relaxation Under Section 80D of Income Tax Act?

  • In case you are salaried and want to file the tax return, you need to submit the policy papers and premium payment slip(s) to your employer to get income tax return.
  • If you are a businessman, then you can file tax return online.

One of the most common questions arising in the context of tax deduction under Section 80D is “whether an individual is eligible for a tax deduction if the employer deducts salary for employee medical insurance?”

The answer is-

Individuals are eligible for a tax deduction where they pay the insurance premium for themselves or their family even after the employer provides health insurance to them and their family.

Wrapping it Up!

Hope this article has helped you to get information related to Section 80D of Income Tax Act, 1961. The aforementioned information is updated with the changes that are brought into Section 80D of Income Tax Act in the financial year 2019-20.

However, tax saving is an additional benefit offered by a health plan, it should not be your prime concern for buying a health cover. Medical insurance helps you mitigate those unexpected expenses arising out of a medical emergency. So, don’t take it out of a compulsion; compare well, look for the benefits and consider one.

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