Medical insurance preserves your savings in times of medical crisis. It provides you with financial support and assists in accessing quality healthcare. However, the health insurance penetration rate in India is low. Most Indian citizens consider premium payments a burden and depend on borrowings during medical calamities.
The government, to reverse this trend, introduced Sec 80D of the Income tax Act. Section 80D allows you to reduce your tax liability while enjoying the protection of a mediclaim policy. But, people find it challenging to comprehend this section due to the complexity of the income tax statute. This article solves this problem by providing you with all the necessary details.
What is Section 80D?
Under Sec 80D of Income Tax Act, premium paid on a mediclaim policy can be claimed as a deduction from the taxable income. It is offered over and above the deduction under Section 80C. The insurance policy can be taken for self, spouse, dependent children, or parents. Expenses paid for preventive health checkups are also covered.
Who is Eligible Under Section 80D?
Individuals and Hindu Undivided Families (HUF) are eligible under this section. Other entities, like companies, partnership firms, etc., are not covered. The policy can be taken for.
- Dependent children
Which Payments are Eligible Under Section 80D?
The following payments are covered under the said section.
- Premium paid for medical insurance taken for self, spouse, dependent children, or parents in a mode other than cash.
- Charges related to preventive medical checkups.
- Medical expenditure incurred on a senior citizen (aged 60 years or above) who does not have medical policy coverage.
- Contribution to Central Government Health Scheme or other schemes notified by the government.
What is the Limit for Section 80D Deductions?
The following table presents the limits for 80D deductions in different scenarios.
|Self below 60 yearsParents below 60 years
|Self below 60 yearsParents above 60 years
|Self above 60 yearsParents above 60 years
|Deduction for self, spouse & dependent children
|Deduction for parents
What are the Points to Remember?
To avoid any complications in your tax calculation, you should be mindful of the following.
- Premiums should not be paid in cash. Modes like cheques and electronic payments should be used.
- Relatives like brothers, sisters, grandparents, uncles, aunts, and working children, are not covered.
- Group health insurance premium paid on behalf of employees is not eligible for tax benefit.
- GST and cess charges levied on premiums paid can not be claimed.
How are Single-Premium Health Insurance Policies Treated?
Budget 2018 provided much-needed clarity to taxpayers about single premium policies. As a part of these policies, a single premium is paid in a lump sum. The policy still provides benefits for multiple years. The Finance Act 2018 stated that for these policies, assessees can obtain the tax benefit on a pro-rata basis. This will be subject to the maximum limit of 80D deductions. For instance, if someone pays a premium of ₹40,000 for a two-year policy, he will be able to deduct ₹20,000 per year.
What Documents are Required for 80D Deductions?
The process for availing the exemption has been made simple by the income tax authorities. No documentation or proof is mandated. However, it is advised to maintain some basic documents. This will help you while filing your tax return. Your employer can also ask for proof while issuing Form 16 of the income tax act. You should ideally try to maintain a record of health insurance premium receipts, hospital bills, medical expense receipts, etc.
The government uses the taxation policy not only to assure consistent revenue but also to boost specific spending. 80D deductions encourage people to get medical insurance. The ultimate aim is social welfare and better health outcomes for all. So, what are you waiting for? Get a health insurance policy now.