Deduction in respect of Medical Insurance Premium: Section-80D
Nowadays, the risk arising from lifestyle diseases and the medical expenditure on treatment of such diseases has drastically increased. Therefore, medical insurance has become very important to secure self and the family. The Income Tax Act, 1961 also gives relief for payment made by taxpayers towards medical insurance premium and health expenditure incurred by them.
Section-80D of the Income Tax Act, 1961 governs the provisions for treatment of medical insurance premium and health expenditure incurred by the assessee. Section-80D allows deduction for all above expenditure under 3 heads:-
- Medical Insurance Premium
- Preventive Check up Expenditure
- Medical expenditure incurred in form of consultation, hospitalization and medicines
Who can claim deduction under section 80D:-
- Every Individual assessee
- Hindu Undivided Family (HUF)
It is important to note that an individual assessee who is a non resident* can also claim deduction for medical insurance premium.
Conditions for claiming deduction:-
- Individual assessee can claim deduction for payment of medical insurance premium of:-
- Self
- His/Her Spouse
- Dependent children
- Parents
- HUF can claim deduction for payment of medical insurance premium for any of the member of HUF.
- Deduction is allowed only on payment basis i.e. claim u/s 80D cannot be made on due basis.
- Deduction is allowed only where the payment is made by any mode other than cash. However, for preventive health check up, payment can be made in cash mode also.
Limits of deduction under section-80D
|
Nature of payment |
Deduction in case of Individual taxpayer |
|||
|
Family members other than parents |
Parents |
|||
|
Age below 60 years |
Age above 60 years |
Age below 60 years |
Age above 60 years |
|
|
Medical Insurance Premium |
25,000 |
50,000 |
25,000 |
50,000 |
|
Contribution to CGHS or any other notified scheme |
25,000 |
25,000 |
N.A. |
N.A. |
|
Expenditure on preventive health check up |
5,000 |
5,000 |
5,000 |
5,000 |
|
Medical expenditure incurred |
Nil |
50,000 |
Nil |
50,000 |
|
Maximum deduction allowable |
25,000 |
50,000 |
25,000 |
50,000 |
Thus, on the basis of above limits, following scenario for maximum deductible amount can arise:-
|
Situations |
Premium paid for self, spouse and children |
Premium paid for parents |
Total deduction allowable |
|
All family members including parents below 60 years of age
|
25,000 |
25,000 |
50,000 |
|
Individual & family members below 60 years but parents above 60 years |
25,000 |
50,000 |
75,000 |
|
Both individual and parents above 60 years |
50,000 |
50,000 |
100,000 |
We will try to understand it by an example: Suppose, Rajesh has an age of 45 and his wife 42 years. They took a medical policy paying premium of Rs. 34,000. He also took health policy for his father whose age is 69 years and premium paid thereon is Rs. 48,000. In this case, he can claim deduction as follows:-
- For self and spouse:- Rs. 25,000
- For parents:- Rs. 48,000 (as his father is a senior citizen i.e. above 60 years)
Thus, he can claim a total deduction of Rs. 73,000.
But suppose, his own age is 61 years and fathers’ age is 88 years. In this case, he can claim deduction up to Rs. 50,000 for own policy as well as fathers’ policy. Therefore, he will be allowed deduction as follows:-
- For self and spouse:- Rs. 34,000
- For parents:- Rs. 48,000 and total Rs. 82,000.
|
Nature of payment |
Deduction in case of HUF taxpayer |
|
|
For members below 60 years of age |
For members above 60 years of age |
|
|
Medical Insurance Premium |
25,000 |
50,000 |
|
Contribution to CGHS or any other notified scheme |
N.A. |
N.A. |
|
Expenditure on preventive health check up |
Nil |
Nil |
|
Medical expenditure incurred |
Nil |
50,000 |
|
Maximum deduction allowable |
25,000 |
50,000 |
Deduction for lump sum payment for medical premium
Finance Act, 2018 brought a new provision for allowing a deduction in case where medical insurance premium is paid in lump sum for more than one year. Where, the taxpayer makes payment for medical premium for more than one year, a proportionate deduction can be claimed by him subject to limits as specified above.
For example: Rajesh whose age is 52 years made payment for health insurance of 3 years in lump sum of Rs. 1,02,000 on 01-07-2019.
In this situation, Rajesh will be allowed deduction in 3 financial (previous) years:- 2019-20, 2020-21, 2021-22. Deduction allowed = 1, 02,000/3 = Rs. 34,000 but restricted to Rs. 25,000.
However, if the age of Rajesh is 62 years, he will be allowed full deduction of Rs. 34,000 for 3 years.
Important points to remember:
- Deduction for medical expenditure shall be allowed only where medical expenditure are incurred for health of a senior citizen family member AND no medical insurance premium has been paid towards the health of such senior citizen family member.
- In case of senior citizens, deduction for medical expenditure can be claimed for hospitalization expenses, doctor’s consultation charges and even purchase of medicines.
- HUF assessee cannot claim deduction for preventive checkup.
- Senior Citizen means to include only individual resident in India who is of the age of 60 years or more at any time during the relevant previous year.
Therefore, if senior citizen is non-resident, the benefit of deduction will be limited only up to Rs. 25,000 in such case. Benefit of extended limit of Rs. 50,000 cannot be claimed for non-resident person.
- Deduction u/s 80D will be allowed only towards health insurance plan approved by IRDA.
- Deduction can be claimed only towards premium paid for self, spouse, dependant children & either parents.
- If children is employed or working, premium paid towards health of such children is not allowed as deduction.
- Deduction is allowed for gross premium paid including GST paid on such premium.
- Group Health Insurance Premium provided by the company is not eligible under section-80D.
