Medical Insurance-Section 80D Deductions Under Income Tax
Health Insurance is a crucial instrument that offers complete protection to you and your loved ones in times of medical emergency. It helps you to pay off all the medical expenses without worrying about your finances.
What's more, other than safeguarding your finances from hospitalization expenses, you can also avail tax benefits on the premiums paid towards your health insurance policy under Section 80D of the Income Tax Act, 1961, subject to terms and conditions. Read here about the several tax benefits which may work to your advantage.
Tax benefits on a health insurance policy in case you are going with old regime for the FY 2020-21
The premium paid by the policyholder under the health insurance policy provides the following two benefits:
As per Section 80D of the Income Tax Act, 1961, the premium paid towards your health insurance plan will be deducted from your total income.
As per section 80D, a HUF (Hindu Undivided Family) or an individual can claim deduction under the following scenarios-
Non-cash payment of medical/health insurance premium paid by taxpayer (individual or HUF member)
Contribution by an individual taxpayer to a central government health scheme
Amount paid by an individual taxpayer for preventive health check-up
Expenses incurred for the upkeep of health of a very senior citizen
A taxpayer can avail of deductions as listed in the table below:
Policy taken in his/her name, parents, spouse, and children.
Policy taken on behalf of any member.
Permissible for charges incurred for up keeping the good health of every senior citizens (residents of India who are 80 years old or above).
Under Section 80D, an individual can claim tax deduction of up to Rs. 25,000 for the insurance of self, spouse, as well as dependent children. An additional deduction for the insurance of parents is also available to the extent of Rs. 25,000 if they are less than 60 years of age, or Rs. 50,000 (as per the Budget 2018) if parents are aged above 60.
If both the taxpayer and parent for whom the medical cover has been taken are aged more than 60 years, the maximum deduction that can be availed under this section is up to Rs.100,000.
An HUF member can claim tax deduction under section 80D for a Mediclaim taken for any of the members of the HUF. They are eligible for deduction up to Rs. 25,000 if the member insured is less than 60 years of age and Rs. 30,000 (which is now increased to Rs. 50,000 in Budget 2018) if the insured is 60 years of age or above.
Extensions of Section 80D
Apart from the 80D medical insurance benefits, there are several other extensions of the Income Tax Act which is meant for individuals with specific needs such as-
Individual or HUF members who are residents of India are eligible for deduction towards the treatment for dependents with disabilities (nursing, rehabilitation, amount paid under any LIC scheme for maintenance).
They can claim up to Rs. 1,25,000 (if the dependent suffers from severe disability).
Individual or HUF members who are residents of India are eligible for deduction towards medical treatment of certain specified ailments for self or dependent.
An assessee is eligible to claim tax deduction of Rs. 40,000 or the actual amount paid, whichever is lower.
Senior citizens, above the age of 60 years, are eligible for tax deduction of Rs. 60,000 or the amount actually paid, whichever is lower.
Super senior citizens, aged above 80 years, are eligible for tax deduction of Rs. 80,000 or the actual amount paid for the medical treatment, whichever is lower.
Deduction under Section 80U
A resident individual who has been certified as a person with a disability by the medical authority can claim the tax benefit under this section.
Persons suffering from any form of physical disability such as blindness or mental retardation can claim Rs. 75,000 (financial year 2015-16) as deduction.
Persons suffering from severe disability can claim up to Rs. 1,25,000 as deduction.
Here is an example of how much tax deduction a married couple both of them are earning can get on health insurance premiums if they had a group health insurance for the family (i.e. self, spouse, and children) and a separate policy for their respective parents.
Group or family health insurance for self, spouse and children
Premium paid for parents' health cover by husband
Premium paid for parents' health cover by wife
Overall tax deduction on the family income
If husband, wife, and parents are less than 60 years of age
Rs. 25,000 tax deduction
If husband and wife are less than 60 years of age but parents are senior citizens.
If husband, wife, and your parents all senior citizens	
Points to remember while claiming tax deductions on health insurance premiums
If you are opting for a new tax regime as per budget 2020, you will not be eligible for any tax exemption under Section 80D for medical insurance premium.
A policyholder can claim tax deduction only if the premium payments are made by any mode other than cash
If in case, one of your parents expires, you can renew the health insurance policy for the remaining parent. You can still claim tax deductions on premiums paid for one parent under the old regime. The tax deduction could be the actual premium or Rs.50,000, whichever is lesser.
Note : Budget 2020 has given an option to choose between the existing income tax regime and a new regime for the coming financial year 2020-21. The new tax regime offers lower tax rates and new tax slabs and simultaneously removes tax exemptions and will result in lower tax outgo for the taxpayer, according to the finance minister.