80D of Income Tax Act, and 80D Income Tax
Paying medical expenses in today’s time can quickly drain away all your savings. This is why purchasing a medical insurance policy is one of the best investments that you can make to protect your future.
Medical insurance plans make it easier to manage hospital bills. And even the government offers tax benefits to citizens on health insurance policies. This is applicable under Section 80D of the Income Tax Act, 1961. These benefits reduce the amount of tax payable for individuals.
However, if you want to make the most out of these deductions, then you should become more familiar with 80D income tax. We’ll help you with all that and more today.
What is Section 80D of the Income Tax Act, 1961?
As mentioned above, Section 80D of the Income Tax Act provides income tax deductions related to medical insurance premium amount that has been paid by an individual. One can claim a tax deduction for health insurance premiums for self, parents, children, and spouse.
Section 80D of the Income Tax Act also allows Hindu Undivided Families (HUFs) to claim a deduction. The extent of deductions that one can claim under this section would depend on the age of the primary policyholder. It should also be noted that health-based insurance riders like critical illness cover, which are usually available with life insurance plans, also come under the purview of Section 80D.
Medical Expenditure Deduction According to Section 80D
It should be noted that all 80D deductions are only connected with medical insurance policies. Let’s take a closer look at these deductions by going through the list that is given below.
Individuals and Families
If an individual pays for insurance premiums for oneself, spouse, or kids, then he or she is eligible to claim a maximum tax deduction of INR 25,000 per annum. In the case of senior citizens, this limit is increased to INR 50,000 per year.
If an individual pays health insurance premiums for parents, then he or she can claim a maximum tax benefit of INR 25,000 per year. This deduction is applicable if the parents are less than the age of 60 years. On the other hand, if the parents are over the age of 60 years, then he or she can claim a tax benefit of up to INR 50,000 per year.
Individuals are also eligible to claim an additional 80D income tax deduction of INR 5,000 for all expenses associated with health check-ups. This also includes all the expenses for a check-up of the entire family.
Applicable Exclusions Under Section 80D
There are some exclusions that are applicable under Section 80D. These exclusions are:
- If an individual is making payments on the behalf of grandparents, siblings, or working children, then one cannot claim tax benefits. This is also applicable for any other relatives that are not explicitly covered under the policy
- An individual cannot claim tax benefits if the payment for the health insurance premium has been made through cash. However, preventive health benefits can be availed even with cash payments
- An individual will not be liable to receive any tax benefits on GST and Cess charges levied on premium payments
- If the company makes a group health insurance premium payment on the employee’s behalf, then it won’t be eligible for tax exemption. The only exception here is if the taxpayers choose to make extra premium payments to improve the group cover. Tax benefits can be availed of on the additional amount that has been paid.
Increase in Tax Deduction Limit As Per Section 80D
According to the announcement made in the Union Budget in 2021, the maximum amount of deduction in health premium is INR 50,000. This is applicable under Section 80D and is also valid for senior citizens.
One of the main aims of the Union Budget 2021 was to take care of the senior citizens in India. 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.
Eligibility for Tax Deductions Under Section 80D
All individuals can claim a tax deduction under Section 80D for themselves, spouses, kids, and parents. Hindu Undivided Families (HUF) are also eligible to claim a deduction under Section 80D. It should be noted that this deduction is subject to the upper limit that is applicable in Section 80D of the Income Tax Act.
Beyond this, the eligibility for tax deduction under Section 80D also includes:
- Individuals and Hindu Undivided Families can file for a tax claim deductions from taxable income under Section 80D
- One is eligible for tax deductions under Section 80D for all payments made towards a health insurance policy
- One is eligible for a tax exemption if he or she is making payments for the treatment or medical check-up of his or her parents who are above the age of 60 years. One should make sure that the parents do not have a separate health insurance policy for this deduction to be valid
- All deductions are also subject to the prevailing guidelines under Section 80D of the Income Tax Act
Limitations Under Section 80D
Till now we have talked about the different criteria associated with Section 80D of the Income Tax Act. In this section, we’ll look at the limitations applicable under Section 80D. These limitations are mentioned in the list that is given below.
- For self and family: A limit of INR 30,000 is imposed which includes INR 25,000 tax deduction and INR 5,000 health check-up
- For self, family, and parents: A total limit of INR 55,000 is imposed which includes INR 50,000 tax deduction and INR 5,000 health check-up exemption
- For self, family, and senior citizen parents: A total limit of INR 55,000 which includes INR 50,000 tax deduction and INR 5,000 health check-up exemption
- For self (senior citizen), family, and senior citizen parents: A total limit of INR 1.05 lakh which includes INR 1 lakh tax deduction and INR 5,000 health check-up exemption