Every section of the Income Tax Act holds special significance and has been crafted for certain specific purposes.
Payment of your health insurance premium under section 80D is quite a prominent one. These sections are more popular as they deal with several tax deduction aspects, something that directly affects the daily life of a standard taxpayer.
We never know when a medical emergency will strike. If it so happens, a week of hospitalization is enough to wipe out a significant amount of your savings, considering the sky-high medical treatment costs and inflation in this sector.
Proper medical insurance is the only way to survive and manage such contingencies. This should be mandatory in your investment portfolio. The government encourages such purchases by allowing special tax deductions u/s 80D of the IT Act under the Old Tax Regime.
What is meant by Section 80D?
Each individual or HUF is eligible to claim tax deduction u/s 80D from their total income for premiums paid towards any health insurance plan. This particular deduction is also applicable to critical illness plans and top-up plans.
You can avail of is deduction facility not only for health insurance for yourself but even for plans purchased for the spouse, dependent children, or even health insurance for parents.
You can avail of this tax deduction facility apart from the standard deductions applicable under Section 80C.
Eligibility to avail of the deductions under Section 80D
In order to avail of the tax deduction facility under Section 80D, you need to meet certain basic criteria.
It is exclusively applicable for premiums paid towards health insurance plan(s) along with medical expenses incurred for the treatment of senior citizens to the taxpaying category of either an individual or HUF.
Among HUF or individual taxpayers, such health insurance can be availed for
- Self,
- Spouse,
- Parents, and
- Dependent children.
Apart from them, no other entity, like a firm or a company, is entitled to avail of this special deduction facility.
Eligible payments as Section 80D deductions
Any HUF or individual is eligible for claiming tax deduction under Section 80D exclusively for the below-mentioned payments:
- Any health insurance premium paid either for self or dependent parents, children or spouse in any method other than cash.
- Any expenses incurred due to preventive health check-ups up to Rs. 5000, which is included in the overall limit.
- Any expenses incurred for the treatment of senior citizens, i.e., any person aged 60 years or above who does not possess any health insurance coverage.
- Any contribution made towards Central Government health scheme(s) or any other schemes as per government notification(s).
Deductions available under the Section 80D of the IT Act
Here is a comparative study for the relevant deductions applicable u/s 80D among different categories for a clearer understanding:
*Members of the HUF are not eligible to claim for an expense towards the preventive health check-up under section 80D.
Factors to remember while buying health plan(s) for claiming 80D deduction
Before you claim for tax deduction under Section 80D, you need to keep certain things in mind while buying any health plan:
- Any health insurance premium paid for siblings, cousins, uncles, aunts, etc. cannot be claimed for tax deduction under this category. The only acceptable relations to claim a tax benefit under section 80C are:
- Self,
- Spouse
- Dependent children
- Dependent parents.
- Any health insurance premium paid on behalf of independent and working children is not eligible for this deduction.
- Even premium payments of independent parents, including pensioners, are not allowed for an income tax deduction under section 80D.
- Premium paid by cash does not qualify for this deduction.
- If you exercise a partial payment for a health plan, either yourself or your parent(s) becomes eligible for tax deduction up to the paid limit.
- No group health insurance premium that is paid by any firm or company is not eligible for this deduction.
- However, if the premium is paid by the employee in a group insurance plan, the same is eligible for an income tax deduction under section 80D.
What are preventive health check-ups?
When you proactively go for a full body check-up at a registered institution or hospital without it being prescribed as a diagnostic test by a doctor, then it qualifies for a Preventive Health Check-up.
However, the institution or hospital needs to be registered, and the premium needs to be paid by you in order to claim an income tax deduction. Some health insurance plans offer free annual health
You can even claim for tax deduction under Section 80D for preventive health check-ups for yourself and your family.
The optimum limit for this deduction is set at Rs. 5000 for each financial year. However, this limit is included in the standard regular deduction for health insurance premium payments paid for yourself and your family.
To avail of this facility, you need to submit valid proof for claiming an 80D tax deduction. Such proofs may include invoices, receipts, bills, or any other relevant document(s), justifying your claim as a valid and authentic one.
Conclusion
Health insurance for parents and self is not only a shield against managing your financial portfolio despite unprecedented medical contingencies but is also a concrete avenue for claiming tax deductions exclusively under Section 80D of the Income Tax Act, 1961.
However, claiming for deductions under this category, do not make the mistake of claiming the optimum limit blindly.
Get a clear assessment regarding your optimal requirement for health insurance and not simply for optimizing your tax savings because doing so will eventually result in unnecessary financial outflow.
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Disclaimer: The above information is for illustrative purposes only. For further details, please refer to the policy wordings and prospectus before concluding the sales.