Taxpayers are always looking for ways to reduce legitimately reduce their tax liability. One of the sections of the Income Tax Act, 1961 that can come to your rescue and reduce your tax liability to a great extent, is Section 80D. This section relates the tax deductions in relation to medical insurance policies. If you have medical insurance for yourself or members of your family, you are eligible to claim tax deductions under Section 80D for the payment of insurance premiums. Please note that the deductions offered under Section 80D are in addition to the tax deductions that are claimed under Section 80C. Deductions under Section 80D can be claimed by both individuals and members of the Hindu Undivided Family. Let's take a look at the various deductions that can be claimed under Section 80D, the things you should be mindful of before claiming the deduction under Section 80D, and how you can claim the deduction.
Deductions under Section 80D
Section 80D provides for various types of deductions on health insurance premiums as summarized below:
You are eligible to available a maximum deduction of INR 25,000 per annum for premiums on a health insurance policy, where such premium is paid for yourself or members of your family. However, if you are a senior citizen, the quantum of the deduction is INR 50,000.
If you are paying the health insurance premium for a policy for your parents, you are eligible to claim a tax deduction of INR 25,000 per year on such insurance premiums. In the event your parents are senior citizens, the amount of deduction is INR 50,000. You will also be eligible to claim a deduction of INR 50,000 for yourself under Section 80D if you are above the age of 60 years.
Section 80D also provides certain additional deductions if you incur expenses for health check-ups for yourself, parents, and other members of your family, including your kids. The amount of deduction in such cases will be INR 5000.
Non-residents are also eligible to claim deduction under Section 80D. The limit of deduction is INR 25,000 for premiums paid for themselves/members of the family and INR 25,000 for policies for parents.
Limit under Section 80D
The limit of tax deduction under Section 80D is as follows:
An individual taxpayer is eligible to get a deduction of INR 25,000 for premiums paid for self, spouse as well as dependants. In case the individual is also supporting parents and paying premiums for their health insurance policy, he/she will be eligible for an additional deduction of INR 25,000. In case the parents are above 60 years of age, the amount of deduction is INR 50,000. In case the taxpayer himself or herself is also above the age of 60 years, the amount of deduction will be INR 50,000.
Deduction for Mediclaim under Section 80D
A question that strikes your mind is the reason behind the Section 80D deduction. Mediclaim or health insurance policies are extremely important as health emergencies can arise at any time. It is important to have an emergency fund to dip into. The reason for providing the Section 80D deduction to taxpayers is to help them to keep the policy alive. Taxpayers are attracted to take Mediclaim policies as they can claim tax benefits in place of that. Given that the tax deduction can be claimed even if the premiums are paid for spouse, dependent children, and parents, the taxpayers are eligible to claim the same tax benefit.
Essential facts to keep in mind before filing a Section 80D deduction claim
Section 80 deduction is a great way to reduce tax liability. If you have a spouse, he or she is also eligible to claim the tax deduction, provided he or she is an earning member. Your spouse can also buy a health insurance policy for his/her parents and claim the tax benefit for the same. You and your spouse can both purchase separate health insurance policies for family members and parents to increase the overall amount saved under Section 80D of the Income Tax Act. The good news is that the tax deduction for parents is available even in the event they are financially independent.
In case you have a single parent, Section 80D deduction can be claimed as per the actual amount of premium paid. Therefore, the amount eligible for deduction will be the actual premium paid or INR 50,000 (or INR 25,000), whichever is lower.
Additionally, please note that the tax benefit is only available for health insurance policy purchased for parents. You will not be able to claim a tax deduction for premiums paid for a policy for your in-laws.
FAQs
Suhas has taken a health insurance policy. His wife is employed with a private sector bank. He has two children, and only one of them is dependant. Is Suhas eligible to claim tax deductions under Section 80D of Income Tax Act, 1961?
Suhas is eligible to claim the tax deductions for the policy premium paid for his spouse and his dependent child. Tax deductions are not available where the children are financially independent.
Is it possible to claim Section 80D deduction where the premium is paid in cash?
No, if you are paying the premium in cash, you are not eligible to claim the deduction.
Mahesh has taken a health insurance policy for his family members. He also has parents who are 80 years old. Is Mahesh entitled to claim any amount as a tax deduction for the health check-up of his family members?
Mahesh can claim INR 5000 as a tax deduction. However, this amount is not available for each individual separately. It has to be claimed as an inclusive amount for all the dependents in his family.
Arjun is covered under a group health insurance policy from his company. Is he eligible to claim deductions under Section 80D?
No, group health insurance policies are not eligible to claim deductions. The benefit under Section 80D of the Income Tax Act is only available for individual policies.
Neha wants to know about some of the best tax saving schemes that she can consider. She is 30 years old and employed. She has parents who are 75 years old.
The best options include the Public Provident Fund, National Savings Certificates, National Pension Scheme, fixed deposits with banks, and ULIPs. Neha can also claim tax deduction under Section 80D for the premium paid for self and parents for a health insurance policy. However, it is important to be mindful of the fact that health insurance policies should not be looked at as merely a tax saving instrument. A health insurance policy is essential since medical emergencies can arise at any time.
Heena is considering an investment in an income tax saving scheme. She came across tax-saving FDs. Will the interest earned on the fixed deposit eligible for tax deductions?
Neha will not receive any tax deductions for the same. The interest earned from the fixed deposit is fully taxable at her hands.
Are non-residents eligible to claim deduction under Section 80D for health insurance premiums?
Yes, they are eligible to claim the benefits.
Nisha is paying the health insurance premium for the health insurance policy for her aunt. Is Nisha eligible to claim deduction under Section 80D?
No, if the assessee is paying premium paid towards a brother, sister, grandparents, aunts, uncles, or any other relative, the same cannot be claimed as a deduction for the purpose of Section 80D.
Have any new changes been introduced in Section 80D pursuant to the annual budget of 2018?
Yes, as per the last budget, changes have brought in for those cases where a taxpayer makes a lumpsum premium payment in a single year for a policy. In such cases, if the policy is valid for more than one year, the assessee is eligible to claim a tax deduction equal to proportionate amount as per Section 80D.
Is a Hindu Undivided Family eligible for the tax deduction benefits under Section 80D?
Yes, HUF is eligible for the deduction under Section 80D. In such cases, the mediclaim insurance must be for the members of the family. The quantum of deduction stands at INR 25,000 at present, where the members who are covered under the insurance policy are less than 60 years old. If the members are more than 60 years old, the quantum of the deduction is INR 50,000.
Rahul’s father has passed away. He is currently paying the insurance premium for a mediclaim policy that insures his mother. Is Rahul eligible to claim benefit under Section 80D of Income Tax Act?
Yes, he is eligible to claim tax benefit in this case as well. In the case of a single parent, Section 80D deduction can be claimed as per the actual amount of premium paid. Therefore, the amount eligible for deduction will be the actual premium paid or INR 50,000 (or INR 25,000), whichever is lower.
Ram pays the insurance premium for a mediclaim policy that insurers his parents. However, his father is employed with a bank. Does this impact Ram's eligibility claim deduction under Section 80D?
No, Ram is still eligible to claim the benefit of tax deduction under Section 80D even though his father is not financially dependent on him.
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