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Applicability, Deductability, and Policies of Section 80D of Income Tax

Published On Jan 07, 2020 5:30 AM By Sakshi Aggarwal

At the time when we are facing financial unrest due to economy slow down, making small changes in the way we invest can create a huge difference in our savings.  

We all have grown up hearing the saying that health is wealth. Which means that owing to a suitable health insurance plan for yourself and your loved ones is a good way to protect your health as well as wealth. Health is understandable, but how can health insurance plans protect wealth? Read further.  

The best way in which you can use your health insurance plans is by showing them as investment proof. The Indian government is encouraging the use of health insurance products by offering tax deductions on them under Section 80D of the Income Tax Act. 

But how? To make the concept easy for you, we have segregated it into following headings. 

Also, read here: Is Health Insurance Only a Short Term Investment?

Section 80D of Income Tax: Applicability 

Individual policyholders or Hindu Undivided Family can make a claim for deduction under Section 80D of the Income Tax Act for health insurance plans that they purchase from their total income in any financial year. Not only oneself, but the plans can include Spouse, dependent children, or parents that too above the deductions claimed under Section 80C/CCC/CCD. 

Section 80D of Income Tax: Deduction

1. Individual

It is allowed for an individual to claim a deduction of up to Rs. 25,000 for plans that may include self, spouse, as well as dependent children. In case they are below 60 years of age, an additional claim for Rs. 25,000 is allowed, whereas if they are more than 60 years in age then Rs. 50,000 (according to Budget 2018) is allowed.  

If both taxpayers, as well as the parent for whom health cover has been purchased, are aged more than 60 years, then a maximum deduction of Rs. 1 Lakh is allowed.  

Various scenarios are explained below for policyholders-

1.When individual and parents are aged below 60 years-Premium paid for self, family and children for up to Rs. 25,000 and premium paid for parents for up to Rs. 25,000 can be claimed. Which means, a total deduction of Rs. 50,000 can be made under Section 80D. 

2.When individual and family below 60 years but parents above 60 years-Premium paid for self, family and children for up to Rs. 25,000 and premium paid for parents for up to Rs. 50,000 can be claimed. Which means, a total deduction of Rs. 75,000 can be made under Section 80D. 

3. When both individual, family and parents above 60 years-Premium paid for self, family and children for up to Rs. 50,000 and premium paid for parents for up to Rs. 50,000 can be claimed. Which means, a total deduction of Rs. 1,00,000 can be made under Section 80D.  

4. Members of HUF-Premium paid for self, family, and children for up to Rs. 25,000 and premium paid for parents for up to Rs. 25,000 can be claimed. Which means, a total deduction of Rs. 25,000 can be made under Section 80D. This is because the parents will be added for tax benefits only if they are senior citizens. 

5. Non-resident individual-Premium paid for self, family, and children for up to Rs. 25,000 and premium paid for parents for up to Rs. 25,000 can be claimed. Which means, a total deduction of Rs. 25,000 can be made under Section 80D. This is because the parents will be added for tax benefits only if they are senior citizens. 
 
Preventive health check-up

For any expenses made for preventive healthcare check-ups, the policyholder will be eligible for a deduction of up to Rs. 5,000 for services availed by Self, spouse, children, or parents. The taxpayers must note that deductions on preventive healthcare are in addition to deduction in the policy premiums.

For instance, if you are eligible for a deduction of Rs. 20,000 on your policy premium, then the policy will pay you Rs. 25,000, i.e. Rs. 5,000 extra for a health check-up.  

Single premium health insurance plans

In case a taxpayer has paid for policy premium in a lump sum in a single year for a policy lasting more than a year, then he/she can claim for a deduction for an appropriate fraction of the amount. It can be calculated by dividing the premium paid by the number of years of the policy. But this will also be subject to limits of Rs. 25,000 or Rs. 50,000 as the case will be. 

Points to remember before making an investment 

a. Payment for health insurance plans can be made in any mode other than cash.
b.Individual residents in India who are aged more than 60 years or above are considered senior citizens.
c.Tax benefits cannot be availed for the premium paid for Sister, Brother, Grandparents, Uncles, Aunts, or other relatives. 
d. Premium paid on working children’s behalf cannot be taken for tax benefit. 
e.If you and your parent have made payment partly, then both are allowed to claim for deduction up to a specified extent.
f.The deduction has to be taken after excluding Service Tax and Cess portion from premium.
g.Group health insurance plans offered by companies are not eligible for a tax deduction. 

Also Read

Understanding Section 80D of the Income Tax Act and Its Benefits on Health Insurance

All About Grace Period in Health Insurance

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