Tax Benefits on Health Insurance under Section 80D

• Written by Nidhi Goyal

  Reviewed by Akhil Pillai

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Nowadays, buying a mediclaim policy has more relevance than ever. Visiting the hospital becomes inevitable when you encounter a sudden medical emergency or undertaking a planned treatment for an illness. Having a good mediclaim policy in India helps you deal with the huge hospitalisation costs and brings you many tax benefits under section 80D of the Income Tax Act.

The tax advantages are applicable when you buy an individual or a family floater mediclaim insurance plan. So, the next time you file your income tax returns, you can be assured that you will become eligible to claim a deduction under section 80D. While the Indian government focuses on providing quality healthcare to its citizens, it also provides tax benefits under the 80d provision for individuals as they can look forward to savings by opting for medical insurance.

Read further to understand how much you can save under the provisions of the Income Tax Act.

What is Section 80D of The Income Tax Act 1961?

According to Section 80D, an individual or HUF can get tax deductions of up to Rs 1 lakh on premiums paid for a health or life insurance policy. You can avail of the 80D deduction benefits for an individual policy or a family floater. This deduction can be claimed if you pay taxes under the old tax regime. 

Who can claim for Rs 25,000/ deduction?

• An individual policy, all aged less than 60.
• A family policy for someone under the age of 60
• A policy covering parents who are under 60. 
• HUF members less than 60 years of age.

Who can claim Rs 50,000/ deduction?

• An individual policy for all aged more than 60.
• A family policy covering 60 years or above policyholders.
• A policy covering your parents who are 60 or above. 
• 60+ HUF members.

Benefits of Section 80D of Income Taz Act, 1961

• Tax Deductions: An insurance policy not only gives insurance coverage but makes you eligible to reap taxation of health insurance benefits under Section 80D of the Income Tax Act. You can claim tax deductions of up to Rs 1 lakh on the premiums paid towards your health insurance policy.
• Deduction on Medical Tests Cost: The deduction under sec 80D allows you to save Rs 5,000 on preventative health check-ups.
•  Pre-Existing Diseases Cover: You are eligible to claim deductions if you pay premiums for pre-existing diseases in your insurance policy.
• Tax Benefits for Parents: Under Section 80D, you can claim extra deductions from your parent’s health insurance policy, irrespective of age.
• Critical Illness Cover: Under Sec 80D, you can claim a deduction for the extra premium you pay for coverage of critical illnesses like heart attack, cancer, stroke, etc, for a health insurance policy.

Eligibility Criteria for Health Insurance Tax Deductions

Individuals and Hindu Undivided Families (HUF) are eligible to avail of the benefits of Section 80D. NRIs who pay taxes in India and have a medical insurance policy can claim tax exemptions under Section 80D. No other entity, like an organisation, can claim the benefits. 

What is The 80D Deduction Limit?

The maximum deduction limit depends on certain factors-

Additional Benefits for Senior Citizens under 80D Deduction

Even if senior citizens don’t have a health insurance policy, they can claim tax exemptions up to Rs 50,000 on medical expenses incurred. However, they are not eligible for the 80d deduction limit on medical expenses if they have a health insurance policy and have been capable of keeping it active. For example, Mr Singh, 70 years old, with an insurance policy to pay his surgical medical expenses, won’t be eligible for the 80D deduction.

Section 80D Deductions for Multi-year Health Insurance Premiums

In the case of a multi-year insurance policy where the policyholder pays the premium upfront, 80D tax deductions are applicable proportionately. It would be subject to the limits of Rs 25,000 and Rs 50,000. For example, Mr Sinha has paid Rs 40,000 upfront for 2 years for his health insurance coverage; then he can claim Rs 20,000 as a deduction under Section 80D each year.

Deduction Under Section 80DD: Treatment of a Dependent with Disability

Under Section 80DD, a dependent person with a disability can claim a maximum tax deduction of Rs 75,000/. If the person’s disability exceeds 80%, the deduction can be up to Rs 1,25,000/. To claim the deduction, the person should submit a disability certificate issued by the State and central governments. Individuals and HUFs are responsible for expenses incurred on behalf of people with disability.

Deduction Under Section 80DDB Treatment of Specified Illnesses

80ddb deduction is for expenses related to treating specific illnesses for yourself, your spouse, dependent siblings, dependent parents, and dependent children. Some of the specific illnesses covered are cancer, chronic kidney diseases, Parkinson's disease, Aphasia, Blindness, Cholera, and Hematologic diseases. People under 60 get Rs 40,000/ or the amount actually paid, whichever is less. Senior citizens get Rs 1,00,000 or the amount actually paid in the treatment, whichever is less.

Critical Illness Coverage Under Section 80D

It is essential to have insurance coverage to beat the rising inflation and medical treatment costs. Otherwise, you’ve to bear the entire cost yourself. Also, people with critical illness coverage having a health insurance policy are eligible for deductions under Section 80D. 

Difference Between Sections 80D and 80C

Several tax benefits are levied on insurance, two of them are 80D and 80C. The key differences between them are given below-

Deductions for Single Premium Mediclaim Policy

Under a single premium mediclaim policy, a person opting for an insurance policy with a validity of over one year makes a payment for the premium amount in a lump sum. That is, he pays the premium in a single year. As per a government provision announced in Budget 2018, such individuals can claim a deduction of a certain amount proportional to the number of years of the policy period. The mediclaim deduction amount is calculated by dividing the total premium paid in a lump sum by the number of years of the insurance policy. For instance, if an individual is required to pay a premium of Rs 36,000 for a two-year policy period, he can avail of the deduction proportionately over the two-year period. The amount would be Rs 18,000 for each year.

It has to be noted that the deduction cannot exceed the limit of Rs.25,000 or Rs.50,000, as applicable.

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What are the Exclusions under Section 80D?

While a policyholder is entitled to get Section 80D benefits on the health insurance premium paid, there are certain conditions when he or she cannot claim the deduction:

• The taxpayer must make the premium payment, not any third party.
• You are not entitled to receive tax benefits if the company pays the group health insurance premium.
• The premium paid on behalf of working children, siblings, or any member of your extended family is not eligible for tax deductions.
• Cash payments made for the premium do not qualify for the mediclaim Section 80D tax benefits.

You are eligible to get tax exemptions even if you receive medical treatment outside India. To ensure this, your mediclaim insurance policy must have this provision and should be approved by the IRDAI. Otherwise, you cannot enjoy the mediclaim 80d benefits.

Disclaimer: The above information is for reference purposes only. The tax exemptions are subject to the rules and regulations of the Income Tax Act of India 1961.