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Section 80D of Income Tax Act of 1961

Save Tax Now Section 80D of Income Tax Act of 1961

The Income Tax Act, 1961 allows income tax deductions for individuals, which reduces the amount of tax payable. In order to make the most of these deductions, it is important to be aware of the relevant sections.

What is Section 80D?

Section 80D of the Income Tax Act provides income tax deductionsrelated to the medical insurance premium paid for you and your family members. You can claim a tax deduction for the health insurance premium paid for self, parents, children, and spouse. Moreover, this section also allows Hindu Undivided Families (HUFs) to claim a deduction. If you wish to know how you will benefit from this section, read on to know what is Section 80D along with the tax deductions offered in it.

What investment comes under Section 80D?

  • The premiums you pay on a health insurance policy and the expense spent on preventive health checkups can be claimed as deductions under Section 80D of the Indian Income Tax Act.
  • An individual can also claim deductions against the health insurance premium paid for the policies of their parents. The extent of deductions will depend upon the age of the primary policyholder.
  • Heath-based riders such as critical illness cover, available with life insurance plans, also come under the purview of Section 80D.

Deductions as per Section 80D: (Medical Expenditure Deduction)

80D deductions are only connected with medical insurance policies. These deductions are mentioned as follows:

  • Individual and family
  • If you pay insurance premiums for yourself, your spouse, and your kids, you can claim are eligible to claim a maximum tax deduction of INR 25,000 per annum. In the case of senior citizens, the limit is INR 50,000 a year

  • Parents
  • If you pay health insurance premiums for your parents, you can claim a maximum tax benefit of INR 25,000 per year if your parents are less than the age of 60. However, if your parents are senior citizens, you can claim a tax benefit up to INR 50,000 per year.

Additional 80D deduction

You are eligible to claim an additional 80D income tax deduction of INR 5,000 for the expenses associated with health check-ups. This includes complete expenses for a check-up of the entire family.

What are the exclusions under Section 80D?

The exclusions under the section 80D are:

  • If you are making payments on your grandparents, siblings, or working children’s behalf, you cannot avail the tax benefits. This is applicable for any other relative who is not explicitly covered under your policy.
  • If you are making the health insurance premium payments through cash, you will not be eligible for tax benefits. Preventive health benefits can be availed even with cash payment.
  • If the company makes a group health insurance premium payment on the employee’s behalf (non-contributory), it won’t be eligible for tax exemption. However, if the taxpayers choose to make extra premium payments to improve the group cover (contributory), they can claim tax benefits on the additional amount they paid.
  • You will not be liable to receive any tax benefits on GST and Cess charges levied on premium payments.

Union Budget 2018: Increase in tax deduction limit according to Section 80D

As per the Union Budget announced in 2018, the maximum amount of deduction in health premium was raised from INR 30,000 to INR 50,000 under Section 80D. Senior citizens can avail of this benefit. One of the core objectives of the Union Budget 2018 was to take care of the senior citizens in India. Moreover, it is also modifications related to the medical expenditure incurred by individuals aged above 60 and below 80.

This rise in the tax deduction amount is a welcome change for senior citizens and for those who pay health insurance premiums for senior citizens.

Who is eligible for tax deductions under Section 80D?

You are eligible to claim a tax deduction under Section 80D for yourself, spouse, kids, and parents. In addition, as mentioned above even HUFs are eligible to claim a deduction in this section. Any member of a HUF can claim a tax deduction on the amount paid towards the health insurance premium. This deduction is subject to the upper limit according to Section 80D of the Income Tax Act.

Who is eligible for a tax deduction under Section 80D of Income Tax Act,1961?

Eligibility for tax deduction under Section 80D will include:

  • Individuals and HUF (Hindu Undivided Family) can file for a tax claim deduction from taxable income under Section 80D.
  • You will be eligible for a tax deduction under Section 80D if you make premium payments towards a health insurance policy bought for you, spouse, children or parents.
  • If you are making the payments for the treatment or medical check-ups of your parents above the age of 80, you will be eligible for tax exemption. But, for these cases, you will need to make sure that your parents do not have a separate health insurance policy of their own.
  • All deductions are subject to the prevailing guidelines laid down under Section 80D of the Income Tax Act.

    Section 80D Limit

    You can claim a tax deduction on the premium paid for yourself, your family (spouse and kids), and your parents. Explained below is the 80D limit applicable to different categories of people across various age groups.

    • For self and family - INR 25,000 tax deduction + INR 5,000 health check-up, which sums up to INR 30,000
    • For self, family, and parents INR 50,000 tax deduction + INR 5,000 health check-up exemption, which sums up to INR 55,000
    • For self, family, and senior citizen parents - INR 75,000 tax deduction + INR5,000 health check-up exemption, which takes the total tax deduction to INR 80,000
    • For self (senior citizen), family, and senior citizen parents - INR 1 lakh tax deduction +INR 5,000 health check-up exemption, which increases the deduction amount to INR 1.05 lakh

    Deduction on Section 80D in Income Tax Act

    You will be allowed to claim a deduction of ₹25,000 per budgetary year for medical insurance premium instalments. The policy can be either for you, your spouse or your children. If you or your spouse is a senior citizen (60 years of age or above), then the deduction limit will go up to ₹50,000. If you make premium payments in cash, you will not be liable for tax exemptions.

    Scenerio PRemium paid($) Preventive health checkup Maxium deduction under 80D
    Individual,children and family Parents Individual,children and family Parentss
    Individual and parents(below 60) 2500 2500 500 500 50,000
    Individual and parents(below 60) and parents above(60) 2500 500 500 7000 75000
    Individual and parents(below 60) and parents above(60) 2500 500 500 7000 75000
    HUF members 2500 500 500 7000 75000
    Non-residential member 2500 500 500 7000 75000

    Deduction on Preventive Health Care Checkups

    You will be eligible for a tax reduction if you are getting health checkups done annually. The limit that you are eligible for under Section 80D will include the costs for checkups. The limit on check-up expenses is up to ₹5000 for individuals below 60 years of age and ₹7000 for senior citizens for each budgetary year.

    Can HUFs also avail tax exemptions?

    Akin to individual taxpayers, Hindu United Families (HUFs) are also allowed to claim tax exemptions for all or any members, under section 80D of the Income Tax Act. A HUF can claim a deduction under Section 80D for an insurance policy taken for a member of the family. Deduction amount will be ₹25,000 if the insured member is younger than 60 years of age. It will be ₹50,000 if the insured member is 60 years of age or above.

    Deduction on Health Insurance Premium Payments for Parents

    The premiums paid on a medical insurance policy for parents/guardians are qualified to deduce up to Rs. 25,000 in every financial year. If your mother/father/guardian is a senior citizen, the maximum limit goes up to Rs 50,000 a year. The limit will additionally include Rs. 7000, for the expenses incurred through annual health checkups. For individuals who are super-senior citizens (80 years or above) and do not have an insurance policy can avail a tax deduction of up to Rs. 50,000 every financial year for annual medical checkups and hospital treatments. But, the tax exemption is not for their expenses.

    No Tax Benefit on Cash Payment

    A prerequisite for getting the tax benefits through these insurance policies is that you must make premium payments through a cheque, draft, credit or debit cards, online banking, etc. A tax benefit is not accessible for the premium payments made through cash. The only exception for tax exemption on cash payments is that preventive health checkups can be paid through cash.

    Section 80D Deductions for FY 2019-20 & AY 2021-21

    The Annual Budget for 2019-20 laid down the following limits for Section 80D deductions:

    1. Individual below 60 years of age = ₹25,000
    2. Individual above 60 years of age = ₹50,000
    3. Individual below 60 years of age + Family (Spouse and Dependent Children) = ₹25,000v 4. Individual above 60 years of age + Family (Spouse and Dependent Children) = ₹50,000
    5. Premium paid towards parents (below 60 years of age) = ₹25,000
    6. Premium paid towards parents (above 60 years of age) = ₹50,000

    Thus, an individual can claim up to 1,00,000 (both individual and parents are senior citizens) as a deduction under Section 80D.

    The preventive health checkup benefit is 5000 for the individual and their family and 7000 for senior citizens. However, the PHC benefit can be availed only if the deduction limits as mentioned above are not met.

    The reason behind deduction according to Section 80D

    The mediclaim deduction under Section 80D happens so that the medical insurance policy remains active. The insurance policy can be in either your name or your spouse’s name. You must note that apart from saving tax a health insurance plan plays a pivotal role in taking care of your medical expenses if you fall sick and need medical assistance.

    Difference Between Section 80D and Section 80C

    The differences between the 80C and 80D deductions are:

    • Under Section 80D, the taxpayers will be able to get tax exemptions for the health insurance policy. You can get a tax exemption on: ❖ the policy bought for yourself, your family, your parents ❖ expenses incurred because of annual health checkups ❖ Premium paid towards health riders in life insurance policies
    • Section 80C of the ITA will include many different tax saving expenses and investments. Financial investments made in a wide range of investments like savings schemes, life insurance policies, ULIPs, ELSS, Sukanya Samriddhi Yojana, Tax-savings FDs, etc. will come under Section 80C.
    • The reason behind deduction according to Section 80D

      The mediclaim deduction under Section 80D happens so that the medical insurance policy remains active. The insurance policy can be in either your name or your spouse’s name. You must note that apart from saving tax a health insurance plan plays a pivotal role in taking care of your medical expenses if you fall sick and need medical assistance.

      FAQs on Section 80 D

      1. Can you make a cash payment for the premium paid for deductions?

      It is not possible to claim a deduction on the premium amount paid in cash.

      2. Is it possible to claim deduction on the premium paid for your independent children?

      No, deductions can only be claimed if you pay the premium for dependent children.

      3. Can you claim a deduction if your spouse and parents are not dependent on you?

      Yes, you can claim deductions even when your parents and spouse are independent.

      4. Can you claim a deduction on the service tax paid on the insurance premium?

      You cannot claim a deduction on the service tax amount because it is paid in addition to the premium and it is collected by agencies.

      5. Is it possible to claim deductions for health check-up of dependents in your family?

      Yes, you can claim a health check-up deduction up to INR 5,000 inclusive of all the dependents in your family.However, this facility is not available separately for every individual family member.

      Now that you have a clear idea of what is 80D in income tax, you must ensure that you avail of the tax deduction in this section if you are paying health insurance premiums for yourself, your spouse, dependent children, and parents.

      6. What is the limit of deduction under Section 80D of Income Tax Act, 1961?

      The breakdown of the deduction limits are as follows:

      1. Individuals (below 60 years), with spouse and dependent children will get a deduction up to ₹25,000 every year.
      2. Individuals (above 60 years), with spouse and dependent children will get a deduction up to ₹50,000 every year.
      3. Individuals buying a separate policy for their dependent parents can claim an additional ₹25,000 if both the parents are below 60 years of age.
      4. In case one of the parents is a senior citizen (above 60 years of age), the individuals can claim up to ₹50,000 as tax deduction.
      5. Hindu Undivided Family (HUFs) can claim up to ₹25,000 every year and an additional ₹25,000 for a separate senior citizen policy.
      6. Individuals can claim ₹5000 (below 60 years) or ₹7000 (above 60 years) as Preventive Health Checkup, subject to the total deduction falling under the above-mentioned limits.

      7. How much tax exemption can be availed under 80D?

      The Indian Income Tax Act lays down the various deductions available against the premium paid for health cover under Section 80D. To get a better idea about the exemptions you can avail under this section, you can refer to the following:

      1. An individual or an individual with family (spouse & dependent children) can avail a deduction of ₹25,000 per annum if the primary policyholder is below 60 years of age and ₹50,000 per annum if the primary policyholder is above 60 years of age.
      2. An individual can also claim tax deductions on the policy premiums paid towards the health insurance of their dependent parents. If the parents are below the age of 60, the applicable deduction is ₹25,000 per annum. However, if the parents are above 60 years of age, the maximum deduction is ₹50,000 per annum.
      3. HUFs (Hindu Undivided Family) can also claim tax deductions up to ₹25,000 per annum. Also, they can claim an additional ₹25,000 for a separate policy for the dependent parents.
      4. NRIs get a tax deduction of ₹25,000 for their own health insurance, along with an additional ₹25,000 for parents’ health cover.

      Thus, a resident Indian can claim up to ₹1,00,000 as a tax deduction per annum (both individual and parents are senior citizens) for the premiums paid against health insurance coverage.

      All of these limits are inclusive of the exemption for annual health checkups - ₹5000 for individual and family and ₹7000 for senior citizens.

      8. Can I avail tax benefits for more than one health insurance policies

      Yes, you are allowed to avail tax exemptions for multiple health insurance policies. You will need to make sure that you meet all eligibility conditions and the premium payments are up to date for all the insurance policies. If the claim amount is more extensive than the sum insured under the policy on which you have made the first claim, you will have the option to claim the balance amount from the second policy. You must keep this in mind at the time of filing under multiple policies.

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