Section 80D of the Income Tax Act - Everything You Need to Know

Health insurance is without a doubt beneficial. Health Insurance not only secures your savings during a medical emergency but also gives you peace of mind. When an unforeseen medical emergency arises, it will allow you to get the required medical treatment without having to pay for it out of your pocket or savings.

One of the major advantages of health insurance is the tax benefit. Individuals who buy health insurance policies can avail of tax benefits under Sec.80D of the Income tax act.

What is Section 80D in Health Insurance?

Section 80D of the Income Tax Act, 1961 is a provision that allows taxpayers to claim deductions on their taxable income for amounts paid as medical insurance premiums.Under Section 80D, taxpayers can claim deductions for premiums paid towards medical insurance for themselves, their spouse and dependent children.

What should you know about Section 80D of the Income Tax Act?

Section 80D of the Income Tax Act allows any individual or Hindu Undivided Family (HUF) to claim a deduction on health insurance premiums paid from their total income chargeable to tax. This 80d deduction is also available for top-up plans and critical illness plans.

Apart from availing 80d deduction on purchasing a health insurance plan for yourself, you can also avail of 80 d exemptions on purchasing a health insurance plan for your spouse, dependent children or parents.

Who is eligible for deduction under Section 80D?

Individuals (including Non-Resident Indians) and any member of HUFs are the only taxpayer categories eligible for deduction on the health insurance premium and medical expenditures for a senior citizen person.

A business enterprise or a firm cannot claim a deduction under this clause.

What are the deductions eligible under Section 80D?

Individuals or HUFs can claim deductions under Section 80D for the following payments:

• A health insurance premium paid for self, spouse, dependent children or parents in any mode other than cash
• Money spent on preventive health check-up upto a maximum of Rs.5,000
• Medical expenses incurred to treat a Resident senior citizen person (aged 60 years or above) who does not have any health insurance plans
• Payment made by individual, spouse and dependent children to the Central Government health scheme or any other scheme as notified by the government other than by cash mode

What is Preventive Health Checkup?

In 2013-14, the government implemented a preventive health checkup deduction to encourage citizens to be more health-conscious. The goal of preventive health checkups is to detect any illness and minimize risk factors as early as possible via regular health checkups.

You can avail of a maximum deduction of Rs.5,000 for the amount paid towards preventive health checkups under Section 80d of Income Tax Act. This deduction will be applicable only if your deductions are within the health insurance 80d deduction limit.

You can make payments for preventive health check-ups in cash and still avail of income tax deductions.

Aggregate deduction for preventive health checkups of self, spouse, dependent children and parents cannot exceed Rs.5,000.

Overview of deductions available under Section 80D

The table below depicts the 80d deduction limit currently available to an individual taxpayer under different scenarios:

Maximum deduction in Section 80D

Under Section 80D, taxpayers can claim deductions for premiums paid towards medical insurance for themselves, their spouse and their dependent children. The maximum deduction that can be claimed under this Section is Rs. 25,000/—per year for self, spouse and dependent children.

However, if the taxpayer or their spouse is a senior citizen (over 60), the maximum deduction that can be claimed increases to Rs. 50,000/- per year.

In addition to the deductions available for medical insurance premiums, Section 80D also allows for deductions on preventive health check-ups. The maximum deduction for these check-ups is Rs. 5,000/- per year, and it is available to all taxpayers regardless of their age.

How to claim a deduction under Section 80D?

To claim deductions under Section 80D, the taxpayer may have to provide proof of payment for medical insurance premiums and preventive health check-ups. This proof can be in the form of receipts or other relevant documents.

Overall, Section 80d of Income Tax  Act provides an important tax benefit for individuals, families and Hindu Undivided Families (HUFs) who pay for medical insurance and preventive health check-ups. By claiming deductions under this section, taxpayers can reduce their taxable income and save on their tax liabilities.

Example of claiming deductions under Section 80D

An example of claiming deductions under Section 80d of Income Tax Act would be as follows.

Mr. Kumar is a salaried individual with a taxable income of Rs. 5 lakh per year. He pays a medical insurance premium of Rs. 20,000/- per year for himself, his wife and his two dependent children.

He also gets a preventive health check-up done for himself and his family, which costs Rs. 4,000/-.

In this case, Mr. Kumar can claim a maximum deduction of Rs. 24,000 under Section 80D for the medical insurance premiums paid. He can also claim a deduction for the preventive health check-up expenses. 

It is important to note that Mr. Kumar can only claim these deductions if he has the necessary proof of payment in the form of receipts or other relevant documents.

In conclusion, Section 80D of the Income Tax Act provides a valuable tax benefit for individuals and families who pay for medical insurance and preventive health check-ups. By claiming deductions under this Section, taxpayers can reduce their taxable income and save on their tax liabilities. It is essential to understand this Section's provisions and keep track of medical expenses to take full advantage of the deductions available.

Important aspect of Section 80D

Another important aspect of Section 80D is that the premium paid towards medical insurance must be for a policy issued by an insurer. This means that taxpayers cannot claim deductions for medical expenses paid out of pocket or for premiums paid towards Health Insurance policies offered by mutual benefit societies.

Furthermore, it is important to keep in mind that the deductions available under Section 80D are subject to certain terms and conditions.

Key Benefits of Section 80D in Health Insurance

Section 80D of the Income Tax Act in India provides tax benefits for individuals who pay premiums for Health Insurance. The key benefits of this section are:

1. Tax deductions: Section 80D allows individuals to claim deductions on the premiums paid for their own Health Insurance and that of their family members. The 80d deduction limit is INR 25,000 per year for individuals. And 80d deduction limit for senior citizens aged above 60 years is INR 50,000 per year.
2. Cover for pre-existing diseases: Many Health Insurance policies exclude coverage for pre-existing diseases. However,Section 80D income tax allows individuals to claim deductions on premiums paid for policies that cover pre-existing diseases.
3. Cover for preventive health check-ups: Section 80D income tax allows individuals to claim deductions on costs incurred on preventive health check-ups. This can help to encourage individuals to get regular check-ups and detect any potential health issues early on.
4. Cover for critical illness: Many Health Insurance policies provide coverage for critical illnesses such as cancer, heart attack, and stroke. Section 80D income tax allows individuals to claim deductions on premiums paid for such policies.
5. Cover for parents: Section 80D income tax allows individuals to claim deductions on premiums paid for Health Insurance policies for their parents, regardless of their age. This can help to ensure that older family members have access to quality medical care.

How to avail benefits of Section 80D in Health Insurance?

To avail of the benefits of section 80D in Health Insurance, follow the below steps.

1. Purchase a Health Insurance policy: You will need to purchase a Health Insurance policy for yourself, your family members or your parents to be eligible for the tax benefits under section 80D. You can purchase a policy from an insurance company, an insurance broker, or online.
2. Keep the policy documents: You will need to keep the policy documents, such as the policy certificate and premium payment receipts, as proof of your Health Insurance coverage.
3. Claim the deduction: When you file your income tax return, you can claim the deduction for the premiums paid towards your Health Insurance policy.
4. Submit the tax return: You will need to submit your tax return, along with the relevant form and supporting documents, to the Income Tax Department. You can do this online or by visiting a tax office in person. 

What is the mode of payment to avail deductions under Section 80D?

The deduction under Section 80D is available only where the premium has been paid by any mode other than cash. In other words, the tax deduction is not available if the premium has been paid in cash. The premium can be paid either through cheque, draft, debit or credit cards or online channels.

However, the payment for preventive health check-ups can be made in cash.

What are the Exclusions under Section 80D?

• To qualify for health insurance tax deduction benefits, the premium paid must meet the requirements outlined in Section 80D. However, the health insurance tax deduction under Section 80D is not applicable in the following scenarios:
• The premium amount is not paid within the fiscal year
• The premium amount is paid in cash
• The payment is paid on behalf of working children, siblings, grandparents or other relatives
• The company pays the employee's group health insurance premium