Section 80D – Understanding deductions & eligibility

 

Health insurance is one of the best options to mitigate the risk associated with a medical emergency. To promote the purchase of health insurance, the Government of India has introduced tax benefits.

Section 80D of the income tax act allows tax deductions of up to Rs 25,000 every financial year on health insurance premiums. With Section 80D you can also avail an additional deduction Rs 5,000 on any expenses incurred for preventative health check-ups. The deduction under section 80D is limited to either Rs.25000 or Rs. 50,000 as per applicable conditions.

What is Section 80D of the Income Tax Act?

Section 80D of the Income Tax Act offers tax deductions to individuals and HUF of up to Rs. 25,000 for the premiums paid on health insurance in a particular financial year. However, it can go up to Rs. 50,000 per financial year applicable for senior citizens of age 60 years and above. In total, taxpayers can claim up to Rs. 1 lakh in deductions u/s 80D.

Hence people can enjoy tax benefits under Section 80D on the purchase of health insurance policy for themselves, spouses, parents and dependent children. 

Who Is Eligible for Tax Deduction under Section 80D?

Only individual taxpayers and Hindu Undivided Families (HUF) can claim Section 80D deductions under the Income Tax Act. Please note that partnership firms, trusts, companies or any other entity are not eligible to claim deductions under this section. Only payments made toward health insurance premiums and healthcare costs for senior citizens are covered. 

What Deductions Are Allowed Under Section 80D?

Primarily there are two types of deductions which are allowed under section 80D. It includes the amount spent on health insurance policy premiums and the amount spent on healthcare of parents and other family members. Listed below are the deductions allowed to the people as per their age.

Tax Deduction on Health Insurance Premium Paid for Parents Under Section 80D

Taxpayers are eligible to claim additional 80D deductions for paying health insurance premiums for their parents. The maximum deductions are higher for paying insurance premiums for senior citizens. 

If your parents are below the age of 60, you can claim a deduction of up to Rs. 25,000. If one or both of your parents are senior citizens i.e. age of above 60 years, then you can claim a deduction of up to Rs. 50,000. As per your applicable income tax slab you can claim tax deductions under section 80D while you file ITR online.

Preventive Health Check-ups under Section 80D

It is a medical check frequently conducted to determine a particular illness at an early stage which ultimately reduces both the health risk and financial risk. Hence the government has initiated 80D deductions to promote effective health monitoring.

The limit for deductions u/s 80D on preventive health check-ups is Rs. 5,000 in a financial year. The same can be claimed for check-ups of the taxpayer, his/her parents, spouse and any dependent children. However, the maximum 80D deduction limit also applies here. 

Given below is an example to illustrate the total deductions allowed under Sec 80D of the IT Act.

Can Medical Expenses Be Claimed Under Section 80D?

Usually, the amount of health insurance premiums paid for senior citizens is high due to their old age and multiple health complications. Due to this, some insurance companies may charge expensive premiums to senior citizens, which they may be unable to afford. Section 80D provides the benefit of tax deductions on healthcare expenditures for them. 

It provides this relief to senior citizens who do not have any health insurance policy but incur a significant amount of medical expenditure. The reason behind not having health insurance must be the inability to afford high insurance premiums or due to any pre-existing health insurance premium.

Mode of Payments Allowed for Deductions under Section 80D

Here are the payment modes allowed to avail the tax deduction under section 80D:

How to Claim Deduction Under Section 80D?

Claiming section 80D deductionis quite simple and assessment is required to provide payment proof for the amount of medical insurance and preventive health check-ups. It helps in reducing the total taxable income for families, HUFs and individuals. 

To claim deductions u/s 80D, you can send receipts of paying insurance premiums and medical bills to your employer. You can also claim the deductions directly by providing proof while filing Income Tax Returns (ITR).

Key Benefits of Section 80D in Health Insurance

Here are some of the key Section 80D benefits of having a health insurance plan:

• Tax Deduction:

  It allows deduction on the amount of premium paid on a health insurance policy for themselves or for any of their family members. The maximum amount of deduction is Rs. 25,000 (for individuals below 60 years of age) and Rs. 50,000 for individuals of 60 years or above.

• Preventive Health Check-up Cover:

  You can also avail deduction on the amount of expenses paid for preventive check-ups helping you to avoid any potential health complications at an early stage.

• Additional Deductions for Parents:

  irrespective of age, you can claim extra deductions on health insurance premiums paid for your parents.

• Pre-existing Diseases Cover:

  If you have availed a pre-existing illness cover and paying premiums on the same, you are also eligible to claim deductions under Sec 80D of the IT act.

• Critical Illness Cover:

  The majority of the prominent health insurance plans offer coverage for critical illnesses such as cancer, stroke, heart attack, etc. Hence under this section, you can claim a deduction for the extra premium paid for such covers.

Section 80D Deductions for Multi-year Health Insurance Premiums 

Insurance companies offer long-term policy discounts on multi-year health insurance and if the amount of premium is paid in a lump sum while purchasing, the policyholder can get a proportionate amount of tax deduction under Section 80D.

Similar to preventive health check-ups, these tax deductions on multi year health insurance premiums comprise within the overall 80D deduction limit of Rs. 25,000 and Rs. 50,000 (for senior citizens).

Deduction for Medical Expenses of Senior Citizens Under Section 80D

Senior citizens can avail tax deductions of up to Rs. 50,000 even without having any health insurance plan under Section 80D. However, if the senior citizen has health insurance coverage, he/she will not be eligible to claim deductions on medical expenses.

Suppose Mr Anurag has incurred Rs. 70,000 as medical expenditure on his parents, who do not have a health insurance plan. In such a scenario, he will be eligible to claim a tax deduction of up to Rs. 50,000. 

Deduction Under Section 80DD: Treatment of a Dependent with Disability

A maximum tax deduction of Rs. 75,000 is allowed on medical expenses incurred for a dependent person with a disability. The tax deduction can be as high as Rs. 1,25,000 if the severity of the person’s disability is more than 80%. However, to claim such a deduction, the assessee must submit a disability certificate issued by the state and central government while filing tax returns.

You can avail this deduction if any lump sum or annuity payment is made to any insurer to maintain a stable health condition for a dependent person with a disability.

Deduction Under Section 80DDB Treatment of Specified Illnesses

A tax deduction of up to Rs.40,000 is allowed in a fiscal year as per Section 80DDB of the Income Tax Act. However to claim such deductions medical expenses are required to be incurred on certain specified illnesses, including chronic renal failure, malignant cancer, Parkinson’s disease, dementia and HIV AIDS. 

However, this deduction can go up to Rs. 1 lakh in a fiscal year for senior citizens with a specified illness.

Critical Illness Coverage Under Section 80D

Medical emergencies are always uncertain and the financial burden of a critical illness is too much for most people. Even if you are diagnosed with dengue, a few days of hospitalisation can cost a significant amount. Now imagine a condition like cancer, stroke, or cardiac arrest.

If you do not have any health insurance coverage, you will have to bear the entire expense directly from your pocket. That is why many people opt for critical insurance riders to stay financially secure. Premiums for such riders are eligible for tax benefits under Section 80D. Premiums paid of critical illness riders available with life insurance plans are also eligible for deductions under section 80D. 

Section 80D vs 80C

Here are the differences between Section 80D and Section 80C:

What Are the Exclusions under Section 80?

Here are some of the exclusions under the 80D section of the Income Tax Act:

• The amount of premium which is not paid within the financial year

• A situation where the employerpays the entire premiumfor an employee's group health insurance premium

• Any payment made on behalf of siblings, grandparents, working children and any relatives

• The amount of premium paid in cash

Important Points to Remember When Availing Tax Deductions Under Section 80D

Here are some of the key points to remember while availing Section 80D deductions:

• The tax benefits under this section are an additional benefit over and above Section 80C deductions. 

• Apart from individuals and families, HUFs (Hindu Undivided Families) are also eligible to claim deductions under this section.

• You must mindfully review the tax benefits included along with your health insurance plan.

• To be eligible for tax deductions, the premium must be paid in a mode of payment which does not involve cash. However, for preventive health check-ups, cash expenditures are allowed.

• If you pay health insurance premiums in full, you are eligible for tax deductions through the entire policy term.

• Being an assessee, you must keep updated with the tax laws and amendments, as these keep on changing from time to time.

Hopefully, by now you have got some clarity on the benefits of Sec 80D, Section 80DD and Section 80DDB and the expenses allowed under these sections. When availing a new health insurance policy, consider enquiring the insurance provider regarding the tax benefits that come with the policy. And also keep yourself updated regarding the changing tax norms.

FAQs on 80D Deduction

1. What is the 80D and 80DD limit?

   Ans. Under Sec 80D, the maximum deduction limit is Rs. 25,000 and Rs. 50,000 for senior citizens for the amount of health insurance premiums paid in a year. On the other hand, the maximum deduction limit under Section 80DD is Rs. 75,000 for medical expenses incurred on a dependent person with a disability. It can go as high as Rs. 1,25,000 for severe disability. 

2. How do I enter 80D on my tax return?

   Ans. In case you are a salaried individual, you can claim deductions under Section 80D by submitting the necessary medical bill and health insurance premium payment receipts to your employer. You can also make the claim while filing IT returns.

3. What investment comes under section 80D?

   Ans. The following are the expenditures which are eligible under Section 80D: premium paid on health insurance for self, parents, spouse and dependent children, expenses on preventive health check-ups, any expenses incurred in any govt. health insurance policy and medical expenses incurred on the health of senior citizens who don't have a health policy. 

4. Can I claim both 80C and 80D deductions?

   Ans. Yes, you can claim tax deductions under both Section 80C and Section 80D under the old tax regime. 

5. Can I make an 80D claim for parents without receipts or bills?

   Ans. Yes, it is possible to claim tax deductions under Section 80D for parents without any receipts or medicals. But it is always recommended to keep the receipts and bills in hand.

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