Section 80D under the Income Tax Act, 1961, offers health insurance policyholders certain tax benefits that help reduce their yearly income tax liabilities. This provision is applicable on the premium amount paid by the policyholders towards their health insurance policies covering themselves and their eligible family members.
To make the most of the tax benefits in relation to health insurance, it’s imperative to know the details regarding Section 80D of the Income Tax Act 1961. So, let’s dive right into it!
What is Section 80D?
As per Sec 80D of the Income Tax Act, taxpayers can claim tax deductions on health insurance premiums. Benefits under Section 80D are applicable even after claiming exemptions under Section 80C.
Note: Section 80C offers tax exemption of up to Rs. 1.5 lakh from total taxable income. It is applicable on various investments like life insurance, 5-year FD, tuition fee paid towards the education of 2 children, etc.
Simply put, the health insurance premium that individuals pay for themselves or their family members is subtracted from their taxable income. This, in turn, reduces their tax liability.
Deductions under Section 80D
Considering three different scenarios, Section 80D deductions are as follows:
In case of self and family
The maximum amount of deduction that individuals can claim on health insurance policy premiums for themselves and their family members (spouse, dependent children) is Rs. 25,000 per year. However, if the taxpayer is a senior citizen, the maximum amount will be Rs. 50,000 every year.
In case of parents
A maximum of Rs. 25,000 per year will be available as a tax deduction on health insurance premiums if an individual pays the amount on behalf of his/her parents (below 60 years of age). Nevertheless, if the parents are senior citizens, the highest amount of tax deduction that one can claim for a year is Rs. 50,000.
Individuals will be able to claim a deduction of up to Rs. 5,000 each year in relation to the expenses incurred for health check-ups. Note that this amount includes the preventive medical check-up expenses of all family members, including dependent children, parents, and wife.
Eligibility Criteria for Deductions under Section 80D
As per Section 80D, individual taxpayers are eligible for this tax benefit. They can pay health insurance premiums for themselves and the following family members to claim deductions:
- Dependent children
Note that Hindu Undivided Families (HUFs) are eligible for this tax benefit if any one of the family members pays health insurance premiums for a year. HUF members can claim a maximum of Rs. 25,000 if the Mediclaim premium is for individuals below 60 years of age. If the insured individual is above 60 years of age, a maximum exemption of Rs. 50,000 will be applicable.
Limit on Section 80D Deductions
Here is a tabular representation of the overall tax deductions applicable in relation to medical expenditure under Section 80D:
|Age of Covered Individuals||Amount of Premium||Amount of Premium||Deduction Applicable as per Section 80D|
|Parents||Self, and other family members (spouse and children|
|Self and family (spouse, dependent children)||Rs. 25,000||NA||Rs. 25,000|
|Self, family (spouse, dependent children) and parents are below 60 years||Rs. 25,000||Rs. 25, 000||Rs. 50,000|
|Self, family (spouse, dependent children) are below 60 years, but parents are senior citizens||Rs. 25,000||Rs, 50,000||Rs. 75,000|
|Self, family members (spouse, dependent children) where the eldest members are above 60 years of age and senior citizen parents||Rs. 50,000||Rs. 50, 000||Rs. 1,00,000|
Example of Total Tax Deduction under Section 80D
Let’s understand the concept of Tax deduction with the help of this example:
Suppose Ravi, who is above 60 years of age, is paying Rs. 30,000 annually as a premium for health insurance on behalf of himself and his family members. Moreover, he pays Rs. 33,000 for his parents’ medical insurance plan separately. Note that both of his parents are above 60 years of age.
According to Sec 80D, Ravi will be able to claim the following exemptions on his taxable income:
- Tax deduction of Rs. 25,000 on the Rs. 30,000 that he paid as health insurance premium for self and his family members.
- Tax deduction of Rs. 33,000 on the entire amount paid for his parents’ medical insurance policy.
Thus, the overall tax deduction amount that he can claim per year is Rs. 58,000.
Difference between Section 80C and 80D
Individuals often tend to confuse Section 80C with Section 80D of the Income Tax Act. So here are two key distinguishing points between the two.
|Section 80C||Section 80D|
|This section provides deductions up to Rs. 1.5 lakh per year.||Under this section of the Income Tax Act, individuals can claim deductions of up to Rs. 1,00,000. However, this is subject to different conditions.|
|This includes investments in an extensive range of financial instruments, such as small savings schemes, mutual funds, life insurance premiums, and more.||This is specifically meant for deductions in relation to health insurance premiums paid during a year.|
For taxpayers, opting for health insurance policies can be an excellent way to reduce their tax liability. Also, having health insurance coverage can bail one out financially in case of a medical emergency. That said, individuals must make sure to choose a health insurance provider that offers the best facilities.
Navi Health Insurance provides medical insurance policies to individuals in less than two minutes. Furthermore, it offers cashless claims through a network of more than 10,000 hospitals all over India in 20 minutes. Visit www.naviinsurance.com to download the app and initiate the hassle-free application procedure.
Frequently Asked Questions
Will I be eligible for tax deductions under Section 80D if my spouse is not dependent on me?
Yes, individuals will be able to claim tax benefits under Section 80D even if his/her spouse is not dependent. However, they have to pay health insurance premiums on their spouse’s behalf.
Are health insurance premiums paid in cash accepted for deductions as per Section 80D?
No, individuals will not be able to claim tax deductions on medical insurance premiums if they are paid in cash.
Can I claim tax deduction on the service tax paid in relation to the health insurance premium?
Individuals have to pay the service tax amount in addition to the health insurance premium amount. They can’t claim this amount as tax deductions.
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