Because of the many advantages it provides during health and medical insurance, health insurance has become essential. Not only does it provide financial protection against medical expenditures, but it also qualifies for medical and health insurance deductions under Section 80D of the Income Tax Act of 1961.
Deduction according to Section 80D of the Income Tax Act of 1961
The amount of tax deductions you may claim under Section 80D is determined on the number of individuals covered by health insurance. Thus, depending on your Covered Individuals, you may save up to Rs 25,000, Rs 50,000, Rs 75,000, or Rs 1 lakh. Here is a summary of the maximum tax deductions available under Section 80D –
|Covered Individuals||Exemption Limit||Health Check up Exemption Limit||Total Deduction under Section 80D|
|Self, spouse and dependent children||Rs 25,000||Rs.5,000||Rs. 25,000|
|For self and family including parents (all under 60 years of age)||Rs. 25,000 + Rs. 25,000||Rs.5,000||Rs. 50,000|
|For self, family including senior citizen parents||Rs. 25,000 + Rs. 50,000||Rs. 50,00||Rs. 75,000|
|For self and family members including parents (all above 60 years of age)||Rs 50,000 + Rs. 50,000||Rs. 50,000||Rs. 1 Lakh|
*Note: Under Section 80D, the maximum deduction for preventive health check-ups is Rs 5,000 for payments made towards such health check-ups for your spouse, dependent children, parents, and self.
What Is Involved in Section 80D?
Section 80D provides deductions for health and critical illness insurance expenses, which result in tax savings. Section 80D allows you to deduct healthcare-related costs and pay medical insurance premiums for yourself, your spouse, your children, and your senior citizen parents.
Section 80D also includes payments for preventative health screenings, critical illness (CI), and other health-related riders offered by a life insurance policy.
Can Medical Expenses Be Reimbursed Using Section 80D?
The premiums paid for health insurance coverage for senior persons (those aged 60 and above) are often on the higher side owing to a variety of variables, including age and a greater proclivity for health difficulties. At the same time, insurers may be hesitant to give health insurance coverage to the elderly or those with pre-existing conditions.
Section 80D of the Union Budget of 2018 provided some help to older individuals who have large medical bills but are unable to obtain health insurance. Possible explanations include pre-existing medical issues or an inability to pay the hefty rates.
Section 80D of the 2018 Budget was revised to offer a tax deduction for medical expenses incurred by older persons.
This discount may be claimed on medical costs by either the person (senior citizen) or their offspring.
To be eligible for a medical bill deduction, medical costs must be expended on family members aged 60 and over. Furthermore, the person for whose medical expenses have been incurred and a deduction under Section 80D has been made must not be covered by any health insurance plan.
What is included in Medical Expenditure?
While there is no definite justification for medical expenses under the Income Tax Act of 1961, a deduction for them was created in the Finance Act of 2015. The deduction was designed for those who are above the age of 65. (individuals ageing 80 years or above).
The deduction for medical expenses for older persons was raised in the Union Budget 2018. It was done to alleviate the burden on older persons.
According to the motivation, expenditures such as consultation fees, hearing aids, and medications might be deducted. Section 80DDB, in addition to Section 80D, covers medical expenses for particular health problems.
Overall, you may claim a tax deduction for medical costs under section 80D if you meet the following criteria:
- The expenditures must be incurred for a person aged 60 or older.
- There should be no health insurance coverage for the elderly.
Eligibility Criteria for Section 80D Deduction
Individuals and HUFs (Hindu Undivided Families) may both claim Section 80D deductions. However, the deduction limit provided by Section 80D is not as decisive as that provided by Section 80C.
Instead, the deduction provided by Section 80D of the Act is more flexible and permits you to include family members such as your parents. The Section 80D deduction may benefit up to three generations of family members.
Individuals who have incurred medical expenses may claim a Section 80D deduction. As a result, if you are a senior citizen and do not have health insurance coverage, you may be able to claim an income tax saving deduction for yourself.
You may, on the other hand, claim the deduction if you have spent medical expenses for your parents aged 60 and up in a particular fiscal year.
You may include your parents in this insurance fold if you plan your investment well in ahead, particularly if they do not qualify for health insurance coverage or the amount charged is very costly.
Mode of Payment for Health Insurance Premiums
Payment of premiums for any health insurance plan or medical expense will be accessible through a variety of options (except for cash). As a result, you have the option of using several financial channels such as net-banking, debit card, and check.
You may also pay the premium via digital channels such as UPI and mobile wallets.
Payments paid in cash for any medical expense (other than a preventative health check-up) are not eligible for this income tax advantage.
Furthermore, the maximum deduction for medical costs paid under section 80D is the same as the maximum deduction for health insurance premiums. In other words, you may claim a maximum deduction of Rs 1 lakh for costs incurred in a particular fiscal year.
Different Scenarios to Understand Section 80D Tax Savings
Mukesh is a 46-year-old CEO who has health insurance for himself, his wife, and their three children. The policy’s yearly premium is Rs. 18,000 per year. In addition, he has spent Rs 4,000 on preventative health check-ups for his family.
Section 80D Total Tax Savings – Rs 22,000
Nitin, a 38-year-old engineer, must pay a Rs. 12,000 monthly health insurance policy fee. His wife, kid, and himself are all covered by the medical insurance he purchased. At the same time, he has obtained health insurance for his parents (57 and 56 years old, respectively), for which he must pay Rs 22,000 as an annual premium while suffering a Rs 5,000 price for preventative health check-ups for the family.
Section 80D tax savings of Rs 39,000 (Rs 12,000 + Rs 22,000 + Rs 5,000).
Vikas, a 45-year-old accountant, has appropriate medical insurance for himself, his wife, and their three children. The yearly premium was Rs 25,000. Furthermore, he contributes Rs 60,000 to his parents’ medical care (ages 73 and 70), who do not have medical insurance.
Total Section 80D Tax Savings – Rs 75,000 (Rs 25,000 + Rs 50,000)
Section 80D Critical Illness Coverage
Medical crises may occur at any time in your life. The cost burden of medical emergency, such as a few days in the hospital owing to dengue fever, might be enormous.
However, life-threatening illnesses such as heart problems and cancer may quickly cost you many thousands of rupees.
In the lack of health insurance, you may be forced to pay for the charges out of your own pocket. Max Life Insurance’s health insurance products may help you enhance your family’s health while also providing considerable tax savings under Section 80D. You may use your health insurance to pay for any unforeseen incidents while also benefiting from significant tax savings under Section 80D.
Questions and Answers
Que: Who is eligible to claim a deduction under Section 80D?
Ans: Any resident person may claim a Section 80D deduction for health insurance premiums paid for themselves, their families, and their parents.
Que: What falls under 80D medical expenses?
Ans: Under Section 80D of the Income Tax Act of 1961, you may save tax by purchasing health insurance. Section 80D deductions may be claimed for health insurance premiums paid for yourself, your family, and your parents.
Que: What is the maximum exemption limit for 80D?
Ans: Individuals may claim a maximum deduction of Rs.25000 each fiscal year under Section 80D of the Income Tax Act. The 80D exemption limit for senior persons is Rs.50,000. The highest limit for health insurance premiums paid by parents (under 60 years of age) is Rs.25,000. The highest limit for health insurance premiums paid by parents (60 years or older) is Rs. 50,000.