Section 80D Income Tax: Deduction Under Section 80D

Emergencies do not ring the doorbell before walking right in. Health emergencies can arrive unannounced and deplete your wealth if you are not prepared. Mediclaim and critical health insurance plans help you prepare for health emergencies.

These insurance plans are so important to have in your investment folio that now public health insurance is part of social security schemes as well. If you are investing in Mediclaim insurance or critical health insurance, you can also claim a deduction under Section 80D of the Income Tax Act.

Section 80D of the Income Tax Act provides tax deductions on medical insurance premium paid for self, spouse, parents, and dependent children. Individuals and HUF can claim this tax deduction. The deduction limit changes with age. Section 80D provides a deduction of ₹25,000 for self, spouse, and dependent children. An additional deduction of ₹25,000 is available for premium paid for parents aged less than 60 years.

If any insurer that is self, spouse, or parents, are above 60 years of age, the limit for deduction increases up to ₹50,000. If parents are more than 80 years old i.e. super senior citizens and do not have health cover, deduction up to ₹30,000 is allowed on medical expenses incurred for them. The maximum deduction available to individuals is ₹1,00,000 and to HUFs is ₹50,000.

Section 80 includes a long list of deductions from Section 80C to Section 80U. Section 80C is the most popular section, as it contains the most number of instruments and offers a total deduction of ₹1.5 lakh. Another commonly used sub-section is Section 80D, which comes with its own set of tax-saving benefits and perks.

You will be eligible to claim a deduction under section 80D of the Income Tax Act if you meet the following criteria:

• You are filing your income tax return (ITR) as an individual or HUF (Hindu Undivided Family) taxpayer
• You are an Ordinarily Resident or Non-Resident Indian for the ITR
• You have made any transactions eligible for deduction under the section 80D in the previous year.
  

Section 80D allows the following transactions as deductions from your gross total income:

1. You have paid the health insurance premium for
   • Family: Self, spouse, and dependent children below 25 years
   • Parents: Whether dependent or not
2. If you have paid preventive health check-up costs for family or parents
3. If you have paid the medical treatment costs of your senior citizen parents (who are resident Indians for the PY)
4. You have contributed to CGHS (Central Government Health Scheme) or any other similar notified schemes

Section 80D limits the amount of deduction you can claim for the eligible expenses in one assessment year. The amounts are limited based on the following conditions:

1. Resident Indian Family & Parents:
   • If the beneficiaries are below 60: ₹25,000
   • If the beneficiaries are above 60: ₹50,000
   • If the beneficiaries are above 60 but NRI: ₹25,000
      
2. Since you can claim deductions for family and parents separately your total 80D limit will be:
   • When family & parents both are below 60: ₹50,000
   • When the family is below 60 but parents are above 60: ₹75,000
   • When the family is below 60, parents are above 60 but parents are NRI: ₹50,000
   • When family & parents are both above 60:
     • Resident family & parents: ₹1,00,000
     • NRI family & parents: ₹50,000

Preventive health check-up expenses have been included as a part of section 80D deductions in the FY 2013-14. The provisions justify the expenses you incur to maintain your health and avoid larger expenses.

The preventive health check-up deduction under section 80D is limited to ₹5000 per financial year. The limit is a part of the total 80D limit for one taxpayer.

Therefore, your preventive health check-up expense does not expand your maximum 80D deduction limits of ₹25,000 and ₹50,000.

If you (40) are a family of four (you, your spouse and two minor children) and have paid for eligible 80D medical expenses as follows:

1. ₹15,000 for Mediclaim insurance cover for family
2. ₹7000 for preventive health check-ups of your family
3. ₹24,000 for Mediclaim insurance for parents (senior citizens)
4. ₹10,000 for medical treatment of senior citizen parents
5. ₹9000 for preventive health check-ups of parents

You can claim the following amounts under section 80D of the Income Tax Act:

1. ₹20,000 for family (15,000 + 5000)
2. ₹39,000 for parents (24,000 + 10,000 + 5000)

Thus, you can claim a total of ₹59,000 as a deduction from gross total income under section 80D for this previous year.

Section 80D of the Income Tax Act allows you to claim the money spent on your or your parents’ medical treatment. The deduction is allowed only when the beneficiary is (are) a senior citizen.

For example, if you spent ₹70,000 on medical treatment in the previous year, you can avail section 80D deduction under the following conditions:

1. If the age of the beneficiary (of treatment) is below 60 years: Nil
2. If the age of the beneficiary is above 60 years: ₹50,000.
   

You should consider the following points while buying medical insurance and looking to claim a deduction under section 80D:

1. You should purchase an adequate cover for yourself and your family and not just for tax saving.
2. The deduction is available only when you pay the premium for the insurance cover of self, spouse, dependent children below 25 years, and parents whether dependent or not.
3. If both you and your spouse are paying for the family floater health insurance cover, both of you can claim the deduction for your parts of the payment.
4. Prorated deduction benefit applies to premiums paid for parent’s Mediclaim or treatment expenses as well.
5. Group health insurance premium, even if part of CTC, is not eligible for deduction under section 80D.
6. Premium paid in cash is not eligible for deduction under section 80D.
   Service tax and Cess paid on the total premium are not eligible for deduction under section 80D.
   

Tax is deducted from the gross total income to arrive at the net taxable income.

Gross Total Income = Income from Salaries + Income from House Property + Business Income + Capital Gains + Income from other Sources.

Net Taxable Income = Gross Total Income – Deduction specified in Sections 80C to 80U of the Income Tax Act

(which includes Section 80D and its sub-sections)

As per Budget 2018, a provision was made in Section 80D for health insurance plans with a single premium. These are basically policies in which you pay a one-time premium in lumpsum form, instead of regular premiums in instalments. As per the provision, tax benefit for lumpsum premium can be claimed proportionately over the policy term (number of years).

For example, a lumpsum premium of ₹75,000 is paid for a three-year policy. You can claim a deduction of ₹25,000 each for three years even though you have paid ₹75,000 in the first year itself.

The Income Tax Act, 1961, has many provisions that help you maximize your tax savings. Deductions and exemptions offered under the Income Tax Act can lower your taxable income, reducing your tax burden. Here’s a quick summary of how you can maximize your tax savings using the various tax saving investment options under Section 80C, 80CCC, 80CCD and 80D of the Income Tax Act:

1. Invest in instruments that qualify under sections 80C, 80CCC, and 80CCD(1)

Individuals and HUFs can claim a maximum deduction of ₹ 1,50,000 under these three sections, using investment options including the following:

1. Employee Provident Fund (EPF)
2. Equity-Linked Savings Scheme (ELSS)
3. National Savings Certificate (NSC)
4. Post office fixed deposit
5. Premium paid on life insurance
6. Public Provident Fund (PPF)
7. Sukanya Samriddhi Yojana
8. Tax-saving fixed deposits with a 5-year lock-in period
9. Unit-Linked Insurance Plan (ULIP)

In addition, Section 80CCC provides tax deductions for certain pension plans, while section 80CCD(1) covers investments in the National Pension System and the Atal Pension Yojana.

2. Avail additional deduction of ₹ 50,000 under section 80CCD(1B)

The Income Tax Act allows you to save taxes on amounts up to ₹ 50,000 for investments made in the National Pension System.

3. Invest in health insurance plan

One can avail tax saving benefits on the premiums paid towards a health insurance under Section 80D. These deductions can be availed on health insurance premiums paid for self, spouse, children, and parents. You can claim up to ₹25,000 for on health insurance for yourself, your spouse, and your children. On health insurance for your parents, who aren’t senior citizens, you can claim an additional  ₹25,000 under section 80D, while for parents who fall under the senior citizens category, you can claim an additional ₹50,000.

Section 80D can come in very handy and help reduce your tax liability significantly. Other Sections of the Income Tax Act that offer income tax deductions, ranging from Section 80C to 80U, can also be used to decrease your income tax outgo. iSelect Smart360 Term Plan by Canara HSBC Life Insurance offers dual benefits of a protective cover as well as applicable tax benefits. In addition to this, one can avail several perks like coverage against 40 listed critical illnesses, return of total premiums and a steady income benefit.

Both Section 80D and Section 80C of the Income Tax Act help taxpayers benefit from tax-saving deductions. However, each of these serves different purposes in general. Where Section 80C focuses primarily on investments and savings, Section 80D is concerned with expenses related to health insurance premiums and medical expenses.

With a thorough understanding of Section 80D and Section 80C, you can create an efficient tax plan that helps you accumulate wealth. Combining both deductions can increase your tax savings while at the same time offering financial security to your health.

Deductions under section 80D are a good way to save. However, taxpayers miss out on this opportunity due to lack of knowledge and ignorance. Here are a few pitfalls that can cost you a good tax-saving opportunity.

1. Premiums paid through digital modes, cheques, or drafts qualify for deductions. However, cash payments do not. To ensure eligibility, make your payment through an accepted method.

2. Within the 80D deduction limit, you cover preventive health check-ups, too. Up to ₹5,000 deductions are eligible under this category, and most people simply do not know about it.

3. Parents (senior citizens) who are not covered under health insurance are eligible for the deductions of medical expenses of up to ₹50,000. Many taxpayers are unaware of this fact. 

4. If you do not have any part in the premium paid for the Group Health Insurance, the employer-provided health insurance does not qualify for Income Tax Act Sec 80D deductions.

5. Always keep receipts of your premiums and proof of medical expenses to use during tax filing. Without such proof, it can be extremely difficult to complete the process. 

Keeping these points in mind while filing taxes can ensure that you fully utilise the benefits under Section 80D in income tax.

Section 80D deductions not only help reduce your tax burden but also ensure that you and your loved ones have the right health coverage, which is a must in this critical economy. A well-planned health insurance policy promotes financial security, and your choice of plan can make all the difference.

If you're in search of a comprehensive health cover that falls under the tax-saving umbrella of Section 80D, consider the iSelect Smart360 Term Plan by Canara HSBC Life Insurance. With features like critical illness coverage, flexible payout options, and tax benefits, it provides holistic financial security for you and your family.