What is Section 80D of Income Tax Act?

Medical emergencies occur unexpectedly and as you age, your needs for professional health support also increase. Getting health insurance coverage is an ideal way to manage your medical costs amidst the rising medical inflation. 

As per government surveys, approximately 41% of Indian households have at least one member who has health insurance as of 2019-21. However, these numbers aren’t satisfactory when considering India’s total population. As a result, most people depend on their savings or borrow funds to address medical costs. 

To encourage people to get health coverage and avoid paying out-of-pocket, the Government of India provides tax benefits on health insurance premiums. That’s exactly what a deduction under 80D is all about. To know more about the features of the Section 80D deduction and the 80D limit, read on.

What is Section 80D?

Whether you are an individual or belong to an HUF (Hindu Undivided Family), you are eligible for tax deductions on your health cover premiums. As per Section 80D of the Income Tax Act, you can claim tax benefits on the total amount you pay for your premium.

What is beneficial about this is that you can claim the deduction under Section 80D over and above any claims you have made under Section 80C. This clause covers the tax deductions on investments you make toward PPF, LIC, ELSS and more. 

As a taxpayer, you enjoy a dual advantage as you can get tax benefits on both Section 80D and Section 80C. Simply put, Section 80D of the Income Tax Act applies to premiums you pay for critical health plans or top-up health insurance. 

Whether you buy a health plan to cover yourself or invest in a policy to cover your spouse, dependent parents or children, you can claim the 80D tax benefit.

Deductions Under Section 80D

Now that you are familiar with the 80D income tax provision, here is a brief overview of the inclusions of the 80D deduction.

The deduction under Income Tax Section 80D applies to both individual and family floater plans. Even when you invest in a Central Government Health Scheme or Mediclaim, 80D deductions are applicable. 

One of the essential benefits for senior citizens is even if they aren’t paying any medical insurance premium, 80D is applicable. So, those above 60 years without a health cover can also claim a tax exemption under this clause for their medical expenses.

Here is a simple breakdown of 80D deductions in a tabular format:

Deduction Limits Under Section 80D

From the table above, it is clear that you can claim deductions up to ₹25,000 on premiums paid for your parents’ health coverage. However, if either or both of your parents are above 60 years, you can claim a tax rebate of up to ₹50,000 in a year.

To understand the 80D deduction limit better, consider this scenario:

• Your age is 40

• Your father is 70

• You pay a premium of ₹40,000 for yourself

• You pay a premium of ₹45,000 for your father

Here:

• You can claim an exemption up to ₹25,000 according to Section 80D for yourself

• You can claim of up to ₹50,000 for your father’s health insurance premium

• You can get a deduction of up to ₹75,000 in total

To sum up, this is the 80D maximum limit you can avail during a particular financial year. 

Eligibility Under Section 80D

Now that you know the Section 80D limit, be aware of a few eligibility terms to get this deduction. As mentioned, for all individuals, including NRIs and members of an HUF, who pay medical insurance premiums, 80D is applicable. 

The medical expenses of senior citizens are also eligible for the 80D exemption. However, these are the only taxpayer categories eligible for the 80D deduction. The 80D tax exemption provision does not apply to a business entity or firm.

Preventive Check-ups Under Section 80D

Since FY 2013-14, the Indian Government has included preventive health check-ups in 80D provisions. The sole aim is to encourage citizens to proactively address and take care of their health.

According to the revision under Section 80D, deductions up to ₹5,000 for expenses on preventive health check-ups are applicable. By undergoing preventive health check-ups, you can identify health conditions before they worsen and treat them early on. 

However, this deduction of ₹5,000 is a part of the total applicable limit of ₹25,000 or ₹50,000, depending on the scenario. You can make preventive health check-up payments in cash and claim this deduction for yourself, your parents, children or spouse.

Tax Benefits as Per Section 80D

While individuals and HUFs can claim tax benefits as described per this section, you can deduct the cost of your or your spouse’s premium. This applies to your dependent children and parents as well. 

You can even claim tax benefits if both you and your parents are partially paying premiums. However, your sibling’s health cover premiums are not eligible for tax benefits. Remember to consider the deduction without including the service tax or cess from the payable premium amount. 

Another crucial point to note is the payment mode. To avail health insurance tax benefits in 80D, you have to pay your premiums using non-cash modes. However, an exception here is that the preventive health check-up payment is permitted in cash.

Exclusions of Section 80D

While knowing inclusions is essential, you also need to be well aware of exclusions under Section 80D. Here are a few points to note that can exempt you from the tax benefits of 80D:

• Default in premium payments during a financial year

• Premium paid by the employer for group health insurance 

• Premium paid on account of working or employed children or other relatives such as uncles, aunts, grandparents or siblings 

• Premium paid in cash

Under all these circumstances, you are not eligible for tax benefits as per this section.

Difference Between Section 80D and Section 80C

Tips to Remember When Buying Medical Insurance

Here are a few essential tips to consider when investing in a health insurance plan:

• Check the waiting period for pre-existing conditions as mentioned by the insurer

• Understand the claim process by thoroughly reading the policy terms

• Analyse the cashless hospitalisation benefits and other inclusions 

• Check to see if your plan covers pre-and post-hospitalisation costs

Now that you know how health insurance can help you get tax deductions and come to your aid during times of need, sign up for one. Make sure you compare policies and their features before you finalise the plan. To do this with ease, visit Bajaj Markets and check out top medical insurance plans side by side.