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All about section 80D deduction

[ecis2016.org] Know everything about section 80D – deductions, eligibility, policies under medical insurance

In India, the majority of people do not have access to health insurance. Thus, they are forced to rely on personal resources or loans to pay for unexpected medical expenses. Under Section 80D, you can take advantage of tax deductions if you get medical insurance, which the government strongly recommends everyone to do as part of their investment portfolio.

In addition to providing financial protection in the event of medical emergencies, Section 80D plans greatly lower the amount of income that is subject to taxation and, as a result, the overall tax burden. Let’s find out more about the deductions, eligibility, policies, and benefits covered under Section 80D deductions. 

80D of the Income Tax Act: Eligibility

Taxpayers who meet the requirements outlined in Section 80D of the Income Tax Act of 1961 can reduce their taxable income by an amount equal to the entire annual premium that they pay for health insurance. It can be applied to the premiums paid for ordinary health insurance, as well as the premiums paid for critical illness plans and top-up plans. If you purchase health insurance for yourself, your spouse, your dependent children, or your parents, you can be eligible for a deduction under Section 80D of the Internal Revenue Code.

Section 80D deduction: Who qualifies for this under the IT Act?

Under Section 80D, an individual or a Hindu Undivided Family (HUF) can make a claim for a deduction from their taxable income. A person is allowed to make a claim for a tax deduction for the cost of their health insurance premium as well as any expenses expended for a preventative health examination for themselves, their spouse, any children who are financially dependent on them, and their parents. This deduction is not available to be claimed by any other organisation. For instance, a corporation or a firm is not eligible to submit a deduction request following this provision.

Payments that qualify for Section 80D deduction of tax

A person or HUF can submit a claim under section 80D deduction of tax for any of the following types of payments:

  • A premium for medical insurance that is paid for oneself, one’s spouse, one’s children, or one’s parents who are dependents using any method other than cash.
  • Expenses expended as a result of preventative medical examinations and screenings
  • The cost of medical care for a senior adult (defined as someone aged 60 or older) who is not covered by any kind of health insurance plan.
  • The contribution was made to either the health system run by the Central Government or any other scheme run by the government and announced to the public.
  • HUF can claim a deduction under Section 80D for medical insurance purchased for its members.
  • A person can claim a deduction for insurance costs of up to Rs 25,000 for themselves, their spouse, and any dependent children they have. and Rs 50,000 if they are 60 or over.

Allowable section 80D deduction

As stated before, Section 80D deductions are only for medical insurance premiums. The permitted deductions are as follows:

Category Premium paid Premium paid Section 80D deduction
Self, family, and children Parents
Individuals and parents less than 60 years of age Rs.25,000 Rs.25,000 Rs.50,000
Individuals and families under the age of 60 but with parents older than 60 Rs.25,000 Rs.50,000 Rs.75,000
Individuals, families, and parents older than 60 years old Rs.50,000 Rs.50,000 Rs.1 lakh
Non-resident individual Rs.25,000 Rs.25,000 Rs.25,000
HUF (Hindu Undivided Family) Rs.25,000 Rs.25,000 Rs.25,000

Example:

Yash is 40 years old, while his father is 65 years old. Yash has medical coverage for himself and his father, for which he pays Rs 35,000 and Rs 45,000 in premiums, respectively. What is the maximum deduction he might claim under Section 80D?

Yash can collect up to Rs 25,000 for his policy’s premium. Regarding the coverage purchased for his senior-citizen father, Yash can collect up to Rs 50,000. In the present situation, the allowable deduction is between Rs. 25,000 and Rs 35,000. Therefore, he can claim a total deduction of Rs 60,000 for the year.

Health insurance premium paid for parents under section 80D 

  • The amount of the annual premium that is paid for medical insurance coverage for one’s parents is eligible for an extra deduction under Section 80D, which can be up to Rs 25,000. However, if one of your parents is a senior citizen, or if both of your parents are senior citizens, the maximum tax rebate ceiling increases to Rs 50,000 in a fiscal year.
  • If the taxpayer and both of their parents are above the age of 60 and for whom medical coverage has been purchased, the taxpayer is eligible for a deduction of up to Rs. 1,000,000 under this provision of the tax code. Expenses incurred by a senior person (taxpayer/family/parents) that are not covered by any health insurance can be deducted within the stated maximum.

Preventive health check-ups under 80D

According to Section 80D of the Income Tax Act, you are eligible for tax deductions on the amount you spend on preventive health checkups each year. The policy was implemented by the government to encourage individuals to go in for routine preventive health checkups to detect illnesses or health conditions at an earlier stage. You, your spouse, your children, and your parents are all eligible to get this tax advantage if you pay for preventative medical examinations and treatment for yourself, your children, and your parents. 

Under Section 80D of the Income Tax Act, you can make a deduction for a preventative health checkup of up to Rs 5,000 every financial year. This deduction for preventive health check-ups is included within the aforementioned maximum of Rs 25,000 for individuals and Rs 50,000 for senior persons, which are set under Section 80D.

Treatment of specified illnesses deduction under section 80DDB

  • You could also be eligible for a tax deduction under Section 80DDB for medical costs that you have spent on the treatment of certain diseases or conditions. If you are under the age of 60 years old, you are eligible to get a deduction of up to Rs 40,000 on the cost of treatment for certain diseases for each fiscal year. However, the section 80D medical expenditure deduction limit is capped at one lakh rupees for senior citizens. This restriction applies to the amount of money spent on medical treatment for certain conditions within a given fiscal year.
  • The expenditures of treatment for certain diseases, including cancer, chronic renal failure, Parkinson’s disease, AIDS, and others, can be deducted from an individual’s taxable income following Internal Revenue Code Section 80DDB. Referring to Rule 11DD will provide you with the whole list of disorders of this kind. You, your spouse, your parents, your children, and your siblings are all eligible to receive reimbursement for the medical expenses associated with the treatment of certain conditions.
  • Nevertheless, while you are completing your income tax forms, you are required to include an endorsement from a professional as confirmation that you have had treatment for the stated ailment.

Deductions under sub-section 80DD (Treatment of a dependent with disability)

  • If you have a dependent who is disabled and you pay for their medical care, you can be eligible for a tax deduction under Section 80DD of the Income Tax Act. It includes the costs of medical care spent for the nursing care, treatment, maintenance, and rehabilitation of a dependent who has some handicap. Dependents can be any member of your immediate family, including your parents, children, spouse, or siblings.
  • You can be eligible for tax advantages of up to Rs 75,000 on the treatment of a handicapped dependant if they have a disability that is 40 per cent or more, and you may be eligible for tax benefits of up to Rs 1.25 lakh if they have a significant disability that is 70 per cent or more each fiscal year. Nevertheless, when you file your income tax returns, you will need to provide a supporting medical certificate showing that the individual is disabled to be eligible for any tax relief. Make it a point to verify if the medical certificate in question came directly from the government’s central or state medical board

Section 17 allows for deduction for medical reimbursement and allowance expenses

  • You can be eligible for tax deductions under Section 17 of the Income Tax Act for any medical expenses that were paid for by your employer for the treatment of either you or a member of your family. You are exempt from paying income tax on the portion of your salary that your employer contributes toward the cost of medical care for you or a member of your family (yourself, your spouse, your children, your siblings, or your dependent parents). This contribution cannot exceed Rs 40,000 in a single fiscal year. This restriction on deductions takes the role of medical reimbursement as well as a transportation allowance.
  • However, the amount that your employer pays you as a medical allowance toward the expense of medical care for your family (including yourself, your life partner, your children, your dependent guardians, and your siblings) is not eligible for any tax advantages and is fully taxable.

Exemptions provided in Income Tax Act’s section 80D

Let’s take a look at the exemptions that are provided for in Section 80D of the Income Tax Act, which are as follows:

Payment methods for premiums

Only the taxpayer should be responsible for paying health insurance premiums to qualify for tax advantages under section 80D. If the taxpayer is not responsible for paying the premium, then the taxpayer does not qualify for a deduction under section 80D. In addition, if the payments for the premiums are made in cash, the taxpayers will be disqualified from receiving tax advantages.

Tax on services

Taxpayers are not eligible to enjoy any tax advantages related to the service tax and cess charges imposed on the premium payment. The health insurance premium is subject to a service tax, the amount of which is comparable to 14 per cent of the health insurance premium, and this information is provided for those who are unaware of this fact.

Insurance for groups of people

According to subsection 80D of the Income Tax Act, there are no tax advantages associated with group health insurance coverage. However, taxpayers who opt to increase their group insurance by paying an additional premium amount are eligible for a deduction under section 80D for the amount of the additional premium they pay.

There are no tax advantages to cash payments

To qualify for deductions under Section 80D of the Income Tax Act, medical insurance premiums must be paid via a method that does not include cash transactions. You may pay the premium using a variety of payment methods such as online banking, checks, demand draughts, credit or debit cards, etc. When making a cash payment for the premium, the section 80D deduction will not be available to you.

On the other hand, this restriction does not apply to the payment that may be received under the Income Tax Act for preventive health checkups. Even if the payment was paid in cash, you are still eligible for the deduction for preventative health checks on your taxes.

Single-premium health insurance policies 

A new provision for seeking a deduction concerning single premium health insurance plans was presented in Budget 2018.

  • If a taxpayer has made a single premium payment in the form of a lump sum within a single year for a policy that is valid for more than one year, then the taxpayer is eligible to claim a deduction under Section 80D that is equal to the relevant proportion of the total amount paid for the policy.
  • The correct proportion can be calculated by dividing the one-time full premium payment by the total number of years covered by the insurance policy. Having said that, this would once again be subject to the restrictions of Rs 25,000 or Rs 50,000 depending on the circumstances.

How to purchase medical insurance?

Before purchasing any kind of medical insurance, the following are some things that should be taken into consideration from the perspective of claiming a deduction under Section 80D and other general clauses:

  • Contributions for health insurance should be provided to schemes that have been defined by the Central Government or by any other insurer that has been authorised by the IRDAI (Insurance Regulatory and Development Authority).
  • Request that the payment for the insurance premium is made using a method other than cash. Additionally, it will be of great use to you if the insurance provides a cashless claim settlement procedure and a sufficient number of network hospitals that are insured in your city. Both of these things will make your life much easier. It is important to examine the list of hospitals that are part of your insurer’s network and have a relationship with them to handle cashless claims.
  • The cost of hospital room rent and a variety of other expenses are reimbursed based on a predetermined proportion of the amount covered. Before acquiring health insurance, it is essential, therefore, to determine an adequate amount to be covered by the policy.
  • Tell your potential insurance provider to give the provision about pre-hospitalization and post-hospitalization charges considerable consideration. A lot of insurance will pay for any and all costs spent before and after 30 and 90 days of hospitalisation, respectively.
  • A growing number of health insurance companies are beginning to cover alternative treatments, including acupuncture, Ayurveda, yoga, naturopathy, Unani, Siddha, and homeopathy (abbreviated as AYUSH). This is something that might be relevant to a lot of people and should be carefully studied.
  • Other costs, such as those for laboratory testing, visits to specialists, and so on, will also be incurred. A growing number of plans now include daily monetary restrictions as a form of compensation for costs of this kind. Check out the specifics of the daily cash limit that is provided, as this will assist you in paying any additional costs that are not otherwise covered by the insurance policy to have your claim settled.
  • A significant number of health insurance policies provide preventative care in the form of annual exams. Regular checkups involve a variety of diagnostic procedures and health evaluations, both of which are vital to and beneficial for making an accurate early diagnosis of any ailment.
  • Please take into consideration the no-claim guaranteed bonus that is offered each year. Many different insurance companies provide something called a “no-claim bonus,” which increases the policyholder’s amount insured proportional to the number of years during which the policyholder did not file a claim. This raises the maximum amount that may be claimed, providing an extra layer of protection. However, it is important to remember that all permissible expenses, including the choice of hospital room, are related to the initial amount guaranteed. The no-claim incentive is not included in this calculation.
  • After the pandemic, a majority of insurance companies are now offering coverage for COVID. However, before acquiring the insurance, it is important to be aware of particulars such as the coverage of COVID, the limit on expenditures, the daily cash benefits, and other charges such as PPE kits, and whether or not they are covered.

Things to remember to qualify for 80D deduction while applying for medical insurance

  • It is not possible to take a tax deduction for the portion of a medical insurance premium that is paid for a relative such as a brother, sister, grandparents, aunts, uncles, or any other relative.
  • There is no deduction available for insurance premiums paid on behalf of children who are employed.
  • If you and a parent each contributed to the total payment, you and the parent may each claim a deduction proportionate to the amount that you contributed.
  • It is mandatory to accept the deduction without deducting the component of the premium that corresponds to the service tax or the cess.
  • The premium that the employer pays for the group health insurance plan that it provides is not tax-deductible.
  • Any payment method other than cash that was used to purchase insurance will count toward the premium total. Therefore, a deduction can also be taken for a premium that was paid using a credit card or another form of online payment.

FAQs 

Who is eligible for an 80D deduction?

Section 80D allows any person (including non-resident people) and HUF to claim a deduction. Non-resident senior citizens, on the other hand, are not eligible for the greater ceiling of deductions allowed to senior citizens.

Which document is required for Section 80D health examination tax deduction?

The department of income tax does not need the submission of any documents or receipts to claim the deduction while filing ITR. As a matter of record and evidence in the future, it is recommended, however, to save the proof of payment/receipt of insurance premium in your tax file.

WIll somebody be eligible for section 80D deduction if they are paying the premium on behalf of family members?

If you are paying premiums on behalf of your grandparents, brother, sister, uncles, aunts, or any other family members, you are not eligible for a Section 80D tax deduction.

Can I claim tax deductions for several health insurance policies?

Yes, Section 80D allows tax deductions for several health insurance policies. However, you must guarantee that all eligibility requirements are completed and that all insurance payments are paid.

What is the difference between sections 80D and 80C?

Regarding yearly deductions, Section 80C allows for as much as Rs. 1.5 lakh, whereas Section 80D only allows for as much as Rs. 65,000.

What about the service tax I had to pay on my health insurance premium?

Service taxes are collected by separate authorities and are paid in addition to the premium amount. This sum is not eligible for deductions.

Is it possible to claim deductions for all of my dependents’ health check-ups?

There is a maximum deduction of Rs.5,000 for health check-ups that can be claimed by the whole family. This deduction is not accessible to each person individually.

Source: https://ecis2016.org/.
Copyright belongs to: ecis2016.org

Debora Berti

Università degli Studi di Firenze, IT

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