Section 80D: Deductions for Medical & Health Insurance

Section 80D of ITA, 1961 is a provision that helps HUFs (Hindu Undivided Families) and individuals by offering tax deductions on purchased health and medical insurance plans. The goal of this section is to encourage taxpayers to purchase medical insurance plans while decreasing their tax liabilities.

The tax deductions offered under Section 80D also apply to critical illness insurance, policy add-ons and top-up health plans. However, the Section 80D deduction limits depend on the mode of payment, type of expenditure, age and individual relation.

Important: The 80D exemptions and deductions are only available under the old tax regime. If you have opted for the new regime, you will not qualify for these deductions.

Also Read: Tax Deductions and Exemptions Under the New Tax Regime

If you are an individual taxpayer or fall under the HUF in the Indian Income Tax Act, you will avail of Section 80D health insurance tax benefits for:

• Yourself

• Your spouse

• Your parents

• Your children

An individual or HUF in India can claim health insurance tax benefits under Section 80D medical insurance for payments made for:

• Premium payment for a health insurance plan for self, children, spouse, parents, or other dependants in cash or another mode.

• Whatever expenses are incurred during any preventive health check-ups.

• Expenses made as a contribution to the Central Government Health Schemes or any other such schemes notified by the Indian government.

• Medical expenses incurred for a senior citizen who is not covered under any valid medical insurance plan or scheme.

The tax deductions allowed under Section 80D under the Indian Income Tax Act are ₹25,000 per financial year. However, for senior citizens, the Section 80D limit is ₹50,000.

In the table below, we have captured the different slabs of deduction available for the financial years 2020-21 and 2019-20 for an individual taxpayer in the country under different scenarios:

Below are the acceptable modes of payment for expenses under Section 80D.

The preventive health check-up deduction under Section 80D was introduced in 2013-14 to make health a priority among individuals.

With preventive health check-ups, people can mitigate various illnesses at earlier stages, making them easier and less expensive to treat.

Under Section 80D, a deduction amount of ₹5,000 annually is allowed for a payment made for preventive health check-ups. This deduction limit is included within the overall ₹25,000/₹50,000 limit based on the individual’s age.

Let us understand with an example:

Rahul has paid a health insurance premium of ₹23,000 for himself and his family in a financial year. He also had a health check-up during that year, for which he paid ₹5,000. His total expenses would amount to ₹28,000 that year.

As per section 80D, a person can claim tax deductions of ₹25,000 on their health insurance premiums during a financial year. Since the overall applicable deduction limit will be only ₹25,000 for Rahul, only ₹2,000 will be included for deduction for preventive health check-ups.

Also Read: Preventive Health Check-Ups And Tax Deductions

Under Section 80D, maintenance paid for senior citizens' medical expenses without a health insurance policy is applicable for tax deductions. The tax deduction limit, in that case, is ₹50,000 for a financial year.

However, if a senior citizen (individuals aged 60 years or above) has a medical insurance plan, then they are not eligible for this tax deduction.

For example, person X paid around ₹70,000 for their parent's medical expenses. If a person X's parents don't have a health insurance plan, then he is eligible to claim a deduction of up to ₹50,000 at the time of filing tax.

Also Read: How Can Senior Citizens Save Tax on Their Medical Bills U/S 80 D?

Most individuals prefer to buy long-term health insurance policies by paying in advance for specified years to get discounts and benefits offered by the insurance providers. If the individual pays in a lump-sum amount at the time of policy purchase, then they can easily claim tax deductions under Section 80D.

However, tax deductions for health insurance premiums for multi-years will be limited to the overall ₹25,000/₹50,000 deduction limit under Section 80D.

For instance, Person X has paid a lump sum amount of ₹60,000 for a 4-year health insurance policy. In that case, a person can claim ₹15,000 per year as tax deductions for the next 4 years at the time of filing ITR.

As per Section 80DD of ITA, individuals can claim tax deductions on the treatment of a person or dependent with disability for up to ₹75,000. Further, if an individual has severe disability up to 80% or more, then a deduction of ₹1,25,000 is applicable for a financial year.

To claim deductions, taxpayers need to present their disability certificate issued by the state or central government.

Further, individuals can also claim tax deductions under Section 80DD for the treatment, nursing, training and rehabilitation expenses of dependent persons. The dependent individual can be parents, spouse, children and siblings.

Also, individuals can claim deductions for lump sum payments for life insurance or any other health policies for disabled persons under section 80DD.

Under Section 80DDB, individuals can claim tax deductions up to ₹40,000 during the financial year for the treatment of a specified disease such as dementia, chronic renal failure, AIDS, etc. The deduction limit is ₹1,00,000 for senior citizens.

Individuals need to present their medical bills and documents proving the specified disease at the time of filing income tax returns. This is applicable for the incurred medical expenses for self, siblings, parents, spouse and children suffering from the specified disease.

Below are the points to keep in mind while availing of the tax deductions benefits under Section 80D.

• Health insurance tax deductions under Section 80D are only available under the old tax regime. So, if you have opted for the new tax regime, you will not qualify for these deductions.

• The tax deduction benefits for health insurance premiums paid in cash are not applicable. The deductions are only applicable for premiums paid by other modes such as debit cards, cheques, etc.

• If there is a default, i.e., you have not paid/missed your health insurance premium payments during a financial year, then you will not be eligible for tax deductions u/s 80D during that year.

• The tax deductions are not applicable for health insurance premium payments for siblings, uncles, grandparents, aunts, etc.

• The health insurance premium payment for working children is not applicable for tax deductions.

• Individuals can not make claims on service tax and cess amount included in health insurance premiums.

• Tax deductions (filed by the employee) for a group health insurance policy under an employer are not applicable. You can only claim tax deductions for this policy type, subject to certain conditions. E.g. you are paying part of the premiums, etc.

Now that you are aware of the health insurance tax benefits under Section 80D, you should buy medical insurance immediately if you do not have one. First, however, it's prudent to keep a few things in mind to make the right pick. There are several factors to consider while choosing a health insurance plan. Here are a few pointers that should help:

• Choose an Affordable Option - When choosing a health insurance plan, make sure that it's affordable. This is important because you should not have any preconceived notions, as only the costlier medical insurance will provide you with the proper coverage. Budgeting is hugely important when choosing a health scheme. Remember, you will have to make timely payments of your premium, and hence, it shouldn't be at the cost of your regular lifestyle. Keep in mind your income, your family size, and other requirements, and then go for a health insurance plan that works.

• ** Choose One with the Right Coverage** - Always go for an insurance plan that will secure you against all health odds. It should cover pre and post-hospitalization costs, daycare expenses, other related illnesses, transportation charges, etc. If you choose medical insurance for your family, consider their health conditions before choosing the coverage. Compare health insurance plans based on their coverage and costs, and research thoroughly to choose one that will cater to all your needs.

• ** Choose a Plan with Renewability Option** - When buying a health plan, make sure that you check for its renewability options. This is important because you will require insurance coverage mainly during the later years of your life. So, it's prudent to choose a medical insurance cover that will provide you with a lifetime renewability option. It's better not to opt for a plan that comes with a limited renewability feature.

• ** Check the Network Hospitals Covered** -Once you have chosen a few options to go forward with, you need to check whether the health insurance plan has your preferred doctors and hospitals in their network coverage or not. To ensure that you can avail of the best treatment options for yourself and your family, always choose an insurer that offers a wide range of network hospitals. This way, you will be able to get quick, convenient, and the best cashless claim settlements.

• ** Choose an Insurer with High CSR** -While researching the insurer options for your health insurance policy, try to find out about their past CSR or Claim Settlement Ratios. Always buy health insurance online from an insurance provider that has a high CSR. This will ensure that your future claims will not go unanswered or unresolved, no matter what. Also, you will know that your money is in safe hands.

Now that you are aware of the pointers that you need to keep in mind when selecting health insurance plans for yourself and your family, you will be able to avail yourself of better coverage options. Also, knowing the Section 80D deduction limit criteria will make you aware of the health insurance tax benefits that you can get under the same.

What proof is required for 80D medical expenditure?

There is no specific list of documents specified by income tax for claiming tax deductions under Section 80D. However, it is recommended to have complete documentation like medical bills, lab invoices, reports, test receipts, doctor prescriptions, etc, at the time of filing income tax returns.

What is the tax benefit of health insurance under 80D?

As per Section 80D, individuals can claim tax deductions up to ₹25,000/₹50,000, based on their age range on the premiums paid for health insurance plans. This deduction is applicable for health insurance purchased for self, spouse and dependent children.

What medical expenses are eligible for deductions under Section 80D for senior citizens without medical insurance?

While Section 80D of the Income Tax Act does not explicitly define what these medical expenses are, they typically mean medical expenses like doctor consultations, prescribed medication, impairment aids, etc. The total annual deductible cost for these expenses is ₹50,000.