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Section 80D Deduction

WHAT IS SECTION 80D?

To encourage you to invest in medical cover, the government provides a tax deduction for payment of premium on medical insurance. This deduction is offered under Section 80D, and you can claim it in addition to the deduction limit of Rs 1,50,000 under Section 80C.

DEDUCTIONS UNDER SECTION 80D

Deductions under Section 80D are applicable when you buy or renew a medical insurance plan through the payment of premiums.

SOME CONDITIONS THAT YOU SHOULD MEET:

You should pay the premium in any mode other than cash. The health insurance policy can cover the taxpayer and dependents. Dependents include parents, children and spouse.

In the case of HUFs or Hindu Undivided Families, it can be any member of the family.

The deduction can be claimed by individuals for the contribution made to Central Government Health Scheme or schemes notified by the Central Government.

You can also claim deductions for the cost of preventive health check of the family and expenditure incurred for the treatment of a senior citizen who is not insured.

IN WHOSE NAME MUST THE HEALTH INSURANCE POLICY BE?

Individual taxpayer

If you are a resident Indian individual, you can claim the policy in your own name or in the name of your spouse, children, or parents.

HUF

For HUFs, the policy can be in the name of a member of the HUF.

Quantum of Deduction

1.   For medical insurance covering the taxpayer, spouse and children aged below 60 years: A deduction of up to Rs 25,000 is available under Section 80D for expenses towards health insurance. This applies to the income tax computation for FY 2019–20 and FY 2020-21. Please note that dependent children will not be covered by the deduction if they are employed. Male children who are unemployed after 18 years of age can be covered until they are 25 years and female children until they are married.

2.   If the insured is a senior citizen: The deduction available to senior citizens is Rs 50,000, and it applies to FY 2019–20 and FY 2020–21. The limit was earlier increased from Rs 30,000 to Rs 50,000 in Union Budget 2018. The reasoning behind the increase was the higher cost of medical insurance with respect to the elderly.

3.   If the taxpayer is paying for insurance cover for parents under 60: A taxpayer who is paying for the medical insurance of parents aged less than 60 years can claim up to Rs 25,000 as additional deduction under Section 80D. This is irrespective of whether the parents are dependents or not.

4.   If parents are senior citizens: An individual paying the medical bills and insurance premium of senior citizen parents can claim a deduction of Rs 50,000.

5.   If taxpayer and parents are all above 60 years of age: If the taxpayer and their parents are over 60, they can together claim Rs 1,00,000 lakh as deductions.

5.   Deductions for preventive health check-up under section 80D: Since FY 2015–16, a deduction of Rs 5,000 is allowed for the preventive health check-up of individuals. This applies to FY 2019–20 and FY 2020–21. Keep in mind that this deduction is within the limits specified above. It is a cumulative deduction applicable to the taxpayer and their dependents and does not apply on a per-person basis.

6.   Deductions for super senior citizens under Section 80D: Even though there are few medical insurers covering super senior citizens, Union Budget 2018 extended the deduction to Rs 50,000 for super senior citizens. This includes not only their health insurance premium but also any medical expenses incurred in case the individual is not covered by any policy.

7.   Deductions for HUFs under Section 80D: HUFs can claim up to Rs 25,000 as a deduction against the premium paid for health insurance of a member.

This amount will be increased to Rs 50,000 if:

  • Premium is paid for medical cover of a member of the HUF who is a senior citizen or
  • When medical expenditure is incurred for treating a senior citizen who is not covered by insurance.

Examples

1.   Anil, who is 45 years old, pays Rs 29,000 towards his own medical insurance. He also pays Rs 55,000 for the medical insurance of his parents who are 62 and 65 years of age respectively. How much can he claim in deductions under Section 80D? Since he is less than 60 years of age, Anil can claim Rs 25,000 as deductions for his own insurance. Additionally, he can claim Rs 50,000 for the insurance of his parents who are senior citizens. So, in total, Anil can claim Rs 75,000 as deductions under the section.

2.   What if out of the insurance cover of Rs 55,000, Anil’s father pays Rs 25,000 and the rest is borne by Anil? In that case, Anil can claim Rs 25,000 on the insurance premium of his father’s policy in addition to the Rs 25,000 he has claimed for his own medical cover and Anil’s father can claim Rs 25,000 paid by him.

3.   Sunita is 65 years old and pays Rs 50,000 as a premium for her medical insurance. Her insurance premium is high since she is a senior citizen. Sunita also pays Rs 60,000 for her 85-year-old mother’s health insurance. How much insurance premium can Sunita claim as deductions? She can claim a maximum deduction of Rs 50,000 for the premium on her own insurance and an additional deduction of Rs 50,000 for her senior citizen mother’s insurance cover.

DEDUCTION FOR MEDICLAIM UNDER SECTION 80D

A Mediclaim policy not only covers the cost of hospitalization and other expenses but also allows you to claim a deduction under Section 80D.

1.   Individuals can claim a maximum deduction of Rs 25,000 for Mediclaim premium paid for self, children and spouse.

2.   If the person insured is a senior citizen, the taxpayer paying the Mediclaim premium can claim a deduction of up to Rs 50,000. This deduction became applicable from FY 2018–19. The limit was increased from Rs 30,000 in Union Budget 2018.

3.   Up to Rs 25,000 of the Mediclaim premium paid for medical insurance of parents can be claimed as a deduction under Section 80D.

4.   If either or both the parents being insured are senior citizens, then the deduction limit available is Rs 50,000.

5.   The Mediclaim premium paid for the health cover of any member of an HUF is eligible for deduction of up to Rs 25,000. If the member of the HUF insured is a senior citizen, then the deduction limit is Rs 50,000. In other words, if you paid a premium cost of Rs 35,000 for the health cover of a member of HUF who is 65 years old, then you can claim a deduction of the entire premium when you file income tax returns for FY 2019–20 and FY 2020–21.

The Section 80D deduction provides substantial relief under the existing taxation regime. But are you thinking about going for the optional taxation regime that was introduced in Budget 2020? Keep in mind that this new regime waives the 80D deduction (along with other common exemptions and deductions). You will not be able to claim deductions on these expenses in that case.

FAQS ON SECTION 80D

  • QCan I claim a deduction against my husband’s or parent’s health insurance that I pay premium for, if they do not depend on me?
    A

    Yes. The deduction can be claimed by the one who pays the insurance premium for family members, including spouses, children and parents.

  • QCan we claim a deduction for preventive health check-up expenses individually for a family?
    A

    No. The deduction of Rs 5,000 is a cumulative sum applicable to the preventive check-up of taxpayers and their family.

  • QIf the cost of health insurance premium for my senior citizen parents was Rs 60,000 for FY 2019–20, can I claim the entire amount as a deduction?
    A

    No. You can claim only up to Rs 50,000 of the premium for your senior citizen parents as a tax deduction.