Given the unpredictability of life, having good health is invaluable, and securing it through health insurance is a sensible financial decision. The government prioritises your health protection and offers financial incentives through Section 80D of the Income Tax Act. Under this section, individuals and HUF can receive tax deductions if they’re paying for health insurance premiums.
What is Section 80D?
Under Section 80D of the Income Tax Act, you can claim tax deductions for medical/healthcare expenses. You can only claim deductions for medical insurance, critical illness, health-related riders in life insurance, and healthcare expenditures for senior citizens. It also includes costs for preventive health check-ups.
Deduction allowed under Section 80D
- Premiums paid for medical insurance covering yourself, your spouse, dependent children, and parents.
- Costs related to preventive health check-ups are subject to the overall limit.
- Medical expenses for treating a senior citizen who is not covered by any medical scheme.
- Contributions made to Central Government Health Schemes.
Who Can Claim Deductions for Health Insurance Premiums?
To be eligible for deductions on health insurance premiums paid under Section 80D, you must meet the following criteria:
- Policyholder: You, as an individual, or your Hindu Undivided Family (HUF) can claim this deduction. Individual or HUF taxpayers can benefit from deductions for insurance premium payments made on behalf of Self, Spouse, Dependent Children and Parents.
- Health Insurance Policies: The premium paid should be for health insurance policies that safeguard you, your spouse, children, and parents. General insurers, life insurers, or the General Insurance Corporation of India can issue policies.
- Mode of Payment: Premiums should be paid through any mode other than cash to be eligible for this deduction.
Maximum Deduction under Section 80D
The deduction under Section 80D is available as follows:
| Maximum Deduction Allowed (Below 60 years of age) | Maximum Deduction Allowed (60 years of age or above) | |
|---|---|---|
| Self, Spouse, and Dependent Children | Up to ₹25,000 per annum | Up to ₹50,000 per annum |
| Parents | Up to ₹25,000 per annum | Up to ₹50,000 per annum |
Preventive Health Check-ups Under Section 80D
- Section 80D of the Income Tax Act allows you to seek deductions for expenses related to preventive health check-ups. The maximum deductible for this purpose is Rs. 5,000 per financial year.
- Please note that this deduction stands independently and is different from deductions for health insurance premiums and expenses tied to specific diseases. However, the deduction for preventive health check-ups is subject to an overall limit of either Rs. 25,000 or Rs. 50,000, depending on your specific circumstances.
Deduction for Medical Expenses of Senior Citizens under Section 80D
- To assist with the health of senior citizens (aged 60 or above) who do not have health coverage, individuals can claim a deduction of up to Rs. 50,000 on the medical expenses incurred for their care. However, if the senior citizens already possess an active health insurance policy for which they have made payments, they will not be eligible for this deduction.
- For instance, if you’ve spent Rs. 1,00,000 on the medical expenses of your senior parents, and they do not hold a health insurance policy, you can claim a deduction of Rs. 50,000.
Deduction for Multi-Year Health Insurance Premiums under Section 80D
- People sometimes choose multi-year health insurance schemes because they come with discounted rates. These plans offer the chance to obtain health insurance coverage for 2-3 years with a lower premium rate. However, when you opt for a multi-year plan, you cannot claim a deduction for the entire premium paid upfront. Instead, you can claim the deduction proportionally, and it should still fall within the maximum limit allowed.
- Mr Nikhil, who purchased a 3-year health insurance policy and paid Rs. 30,000 upfront, can claim a deduction of Rs. 10,000 under Section 80D for three years.
What falls outside the scope of Section 80D deductions?
- Payment of health insurance premiums in cash is not eligible for a deduction. Medical expenses can be paid in cash.
- Deductions for payments made on behalf of working children, siblings, grandparents, or any other relatives are not allowed.
- Deductions don’t apply to group health insurance premiums covered by the employer.
Final Words
Section 80D encourages individuals and families to prioritise their health and financial well-being by investing in health insurance. It’s crucial to choose a suitable health insurance policy, maintain records of premium payments, and adhere to the eligibility criteria to maximise the advantages of Section 80D. Your health and financial security are interconnected, and Section 80D ensures you can safeguard both.