Section 80D of the Income Tax Act, 1961 essentially offers a tax deduction on an individual’s taxable income if they have made payments towards health insurance policy premiums. This particular deduction is only applicable for individuals and HUFs. Available beyond the amount of Rs.1.5 lakh, this tax deduction is like a blessing in disguise for those who have purchased health insurance policies.
As a taxpayer in India, you must be aware of the multiple financial instruments you can invest in and their subsequent returns. One such component is the sector of health insurance. Not only do health insurance policies provide protection during medical contingencies, they also help save tax, thereby reducing the financial burden on families.
Eligibility Criteria for Section 80D Deduction:
Availing a Section 80D deduction is utterly simple if you have been paying premiums for health insurance policies that you have purchased for:
- Either yourself or your family members
- Your children and spouse
- Any other family member who is dependent on you
What is the Permitted Deduction Amount?
You will be required to claim the deduction under Section 80D when you file your income tax returns for that particular financial year. The deduction is an aggregate of the following elements:
- The amount of deduction one is allowed for paying health insurance policy premiums for self, spouse, and children is Rs.25,000. In case the insured individual is a senior citizen, then the deduction allowed will stand at Rs.30,000.
- The amount of deduction one is allowed for paying health insurance policy premiums for one’s parents is Rs.25,000. If the parents of the individual are senior citizens, then the permitted deduction amount is Rs.30,000.
What is the Maximum Limit for Deduction under Section 80D?
If you have incurred expenses on preventive health check-ups, you are eligible for a deduction till Rs.5,000 under Section 80D. The total limit for deduction is Rs.60,000.
What are the Multiple Kinds of Deductions Allowed?
Essentially, there are four types of deductions one can claim under Section 80D of the Income Tax Act, 1961:
- Deduction allowed if you are paying premiums for a health insurance policy purchased for yourself and your family
- Deduction allowed if you are paying premiums for a health insurance policy purchased for your parents
- Deduction allowed if you have incurred expenses on preventive health check-ups
- Deduction allowed if you are a senior citizen and have incurred expenses on medical bills
Moreover, health insurance providers are known to offer discounts in case the premium amount is paid in bulk for the following years. As compared to the earlier deduction amount allowed (Rs.25,000), Union Budget 2018-19 states that health insurance policies with a single premium that provides coverage for more than one year, will have a deduction on a proportionate basis for the total number of years the policy is provided for.
Example of a Tax Deduction Under Section 80D:
Let’s assume Mr. Samarth is aged 65 years and has purchased a health insurance policy for which he shells out a premium of Rs.36,000, on a yearly basis. Additionally, Mr. Samarth also pays premiums worth Rs.28,000 for health insurance policies for his parents. His parents fall in the ‘’super senior citizen’’ category and are more than 80 years in age. What is the maximum deduction he can extract under Section 80D?
The maximum deduction limit for senior citizens is Rs.30,000, hence Mr. Samarth can claim his own deduction for premiums up until the limit of Rs.30,000. His parents fall in the category of ‘’super senior citizens’’ and are therefore allowed a deduction upto Rs.30,000. Mr. Samarth can claim the premium amount of Rs.28,000 from the total.
Total claimable deduction: Rs.30,000 + Rs.28,000 = Rs.58,000.