Income Tax Taxation

Section 80D of the Income Tax Act: How to Claim this Deduction?

Filing of Income Tax Return is the process of submitting a declaration about the income earned and expenditure incurred by the concerned taxpayer in the previous financial year. The concerned taxpayer submits this declaration to the Income Tax Department. On the other hand, this declaration assists in determining the tax liability of the concerned taxpayer. Also, the tax liability is computed on the basis of the prevailing tax rate slabs.  Hence, ITR Filing is obligatory for all the taxpayers whose income exceeds the prescribed income threshold. Lastly, the process of ITR Filing is regulated and administered under the Income Tax Act, 1961.

Further, the Tax Deductions allowed under the Income Tax Act, 1961 helps a taxpayer in reducing his taxable income. A Taxpayer can avail these deductions only if he or she have made tax-saving investments or have incurred qualified expenses. Furthermore, there are several of tax deductions provided under the various sections that will help in bringing down the taxable income. Out of all the deductions available, the most popular one is the deduction provided under section 80C of Chapter VIA. But, the other chosen deductions under chapter VIA are 80D, 80DD, 80E, 80G, 80DDB, 80U and so on. In this blog, we will be dealing with the deduction provided under section 80D of the Income Tax Act, 1961. 

Medical emergencies do not come with prior notice. Hence, it is always advisable to be safe than be sorry, and it is no special when it comes to Medical Insurance. On the other hand, having a Medical Insurance is must for any investment portfolio; moreover, the government also encourages everyone to invest in medical insurance and also allows the taxpayer to avail deductions regarding this under Section 80D of the Income Tax Act, 1961.

What is the Applicability of Section 80D of the Income Tax Act?

Section 80D of the income tax laws provides for the tax deduction from the total taxable income regarding the payment of the medical insurance premium, which is paid either by an individual or a HUF (Hindu Undivided Family). Further, not only the individual can take the benefit by purchasing a health plan for himself, but can also avail the benefit by buying the health plan policy to secure his spouse, or his dependent children or parent. Also, the tax deduction provided under Section 80D is over and above the threshold limit of the deduction provided under Section 80C, 80CCC, and 80CCD of the Income Tax Act, 1961.

What is the Concept of Section 80D of the Income Tax Act?

Section 80D of the Income Tax Act, 1961 was introduced with a motive of promoting the concept of health planning among individuals and HUF (Hindu Undivided Family). Section 80D provides tax deduction on the following listed expenditure –

1. Medical Insurance Premium
2. Contribution to Central Government Health Scheme (CGHS ) or any other notified scheme
3. Preventive health check-up, and
4. Medical Expenditure incurred in the case of senior citizens.

Further, the amount of deduction depends on the nature of expenditure incurred, mode of payment and the age and relation of the person for whom the concerned expenditure has been done.

Who all are eligible to Claim Deduction under section 80D?

The following can claim the tax deduction provided under Section 80D of the Income Tax Act, 1961 –

1. Individual (either Indian or Foreign Citizen)  can claim this deduction either for himself or for his spouse, parents (whether dependent or not), dependent children 
2. HUF (Hindu Undivided Family) can claim this deduction for any of the members
3. NRI’s (Non-Resident Individual) are also qualified for this deduction

What is the Quantum of Deduction available under Section 80D?

1. Individual – An individual is eligible to claim a tax deduction of up to Rs 25,000 for the medical insurance of himself, his spouse, and the dependent children. On the other hand, an additional amount of tax deduction is also available for the insurance of parents. Also, the amount up to Rs 25,000 is available if the parents are less than the age of 60 years of age, and Rs 50,000, (as per 2018 Budget) if the parents are above the age of 60 years.  If in the case where both the taxpayer and his parents, for whom the medical insurance cover has been taken for, are above the age of 60 years, then the maximum deduction available under this section is up to Rs.1, 00, 000, i.e. Rs 50,000 each. Lastly, it is significant to mention that senior citizen will include the concept of a very senior citizen.
2. Hindu Undivided Family – An HUF (Hindu Undivided Family) can claim a tax deduction under section 80D for a medical insurance cover taken for any of its members. Further, this tax deduction will be up to Rs 25,000, if the member insured is less than the age of 60 years, and will be Rs.50,000 (as per 2018 Budget) if the insured member is above the age of 60 years. Furthermore, HUF (Hindu Undivided Family) is not qualified to claim a tax deduction for the preventive health check-up.

The following table includes the quantum of deduction available to an individual and HUF taxpayer under various scenarios –

Particulars	Premium paid		Deduction provided under 80D
	Self, Spouse, Dependent Children	Parents
Both the Individual and parents are below 60 years	25,000	25,000	50,000
If the Individual and family are below 60 years but the parents above 60 years	25,000	50,000	75,000
Both individual, his family and the parents are above 60 years	50,000	50,000	1,00,000
Members of HUF (Hindu Undivided Family)	25,000	25,000	25,000
If the members of HUF (Hindu Undivided Family) are above 60 years	50,000	50,000	50,000
Non-resident individual (NRI)	25,000	25,000	25,000

Example – Ques – Rohit is aged 46, and his father is aged 66 years. Rohit has taken a medical insurance cover both for himself and his father for which he pays insurance of Rs 30,000 and Rs 35,000 respectively. What would be the maximum amount that Rohit is eligible to claim by means of a deduction provided under Section 80D of the Income Tax Act, 1961 for the FY 2019-20?

Ans. – Rohit can claim to the extent of Rs 25,000, regarding the premium paid on his policy. On the other hand, for the policy concerning his father, who is a senior citizen, Rohit can claim to the extent of Rs 50,000. In the given scenario, the deduction is Rs 25,000 and Rs 50,000. Thus, the total deduction available for the year is Rs 75,000.

What is the Concept of Preventive Health Check-Up Scheme?

Any payment made towards the Preventive Health Check-ups will enable a taxpayer to a tax deduction of up to Rs 5,000, which is included in the overall limit of Rs 25,000 for the individual and his family and Rs 50,000 for his parents ( from 2018 Budget) as the case may be. On the other hand, this tax deduction can also be claimed by the individual either for himself, his spouse, dependent children or for his parents. Also, the payment for preventive health check-up can also be made in cash.

Comparative Chart for the Amount of Deduction for Current and Previous Years

S.no	(Health Insurance Premium + Preventive Health Check Up Expenditure)	F.Y. 2017-2018	F.Y. 2018-2019	F.Y. 2019-2020
1	For Individual and Family	25,000	25,000	25,000
2	For Individual (Senior Citizen) and Family	30,000	50,000	50,000
3	For Parents	25,000	25,000	25,000
4	For Parents (Senior Citizen)	30,000	50,000	50,000
5	For Individual’s Family and Parents	25,000 + 25,000 = 50,000	25,000 + 25,000 = 50,000	25,000 + 25,000 = 50,000
6	For Individual’s Family and Parents (Parents are Senior Citizens)	25,000 + 30,000 = 55,000	25,000 + 50,000 = 75,000	25,000 + 50,000 = 75,000
7	For Individual’s Family and Parents (Both are Senior Citizens)	30,000 + 30,000 = 60,000	50,000 + 50,000 = 1,00,000	50,000 + 50,000 = 1,00,000

 

Our Recommendation: Section 80DD of the Income Tax Act: Who can Claim this Deduction?

What is the Concept of Single Premium Health Insurance Policies?

The Annual Financial Budget of the year 2018 has introduced a new regulation for claiming a tax deduction concerning the Single Premium Health Insurance Policies. As per this new regulation, a taxpayer has made a payment of the lump-sum amount as premium in one year for a plan which is valid for more than one year. Then he can claim a deduction equal to the appropriate fraction of the amount, provided under Section 80D of the Income Tax Act, 1961.

The appropriate fraction can be calculated by dividing the lump sum premium paid, with the number of years of the concerned policy or plan. However, this would again be subject to the threshold of Rs 25,000 and of Rs 50,000 as the case may be.O

What are all Excluded under section 80D of the Income Tax Act?

As per section 80D of the Income Tax Act, no tax deduction shall be allowed on the following amounts –

1. Premiums paid in cash (except in the case of Preventive Health Check-ups)
2. Premiums and expenses paid by any person other than the taxpayer

Points to consider before Investing?

Following are the points which must be taken into consideration before investing –

1. Contribution towards the health insurance policy has to be made to a scheme as prescribed by the Central Government or approved by IRDA (Insurance Regulatory Development Authority)
2. Payment must be made in any mode other than cash
3. Meaning of Senior citizen- The term Senior Citizen means an individual who is the resident in India and who is of the age of 60 yrs or more in the relevant financial year
4. Premium paid towards a sister, brother, aunts, uncle, grandparents, uncles or any other relative cannot be claimed as a tax deduction under this section
5. Premium paid for the working children cannot be claimed for tax benefit
6. In the case, where a part payment is made by an individual and a parent, both of them can claim a tax deduction to the extent paid by each of them
7. The deduction has to be claimed without showing the Service Tax and Cess portion from the premium amount
8. Group Health Insurance Premium offered by the company is not eligible for deduction.

What is the Difference between sections 80D, 80DD, 80DDB and 80U of the Income Tax Act, 1961?

Particulars	80D	80DD	80DDB	80U
Purpose	Medical Insurance  and Medical Expenditure	Medical Treatment of a Disabled Dependent	Medical Treatment of  Self or Dependant for the Specified Diseases	Medical Treatment of a Disabled Assessee (self)
Maximum Limit	Rs 1,00,000	Rs 75,000(for non-severe disability) or Rs 1,25,000(for severe disability)	Rs 40,000 (age is below 60 years) or Rs 1,00,000 (for the age 60 or above)	Rs 75,000 (in case of non-severe disability) or Rs 1,25,000(for the severe disability)
Type of Assessee	Individual or HUF (Hindu Undivided Family)	Resident Individual or  HUF (Hindu Undivided Family)	Resident Individual or HUF (Hindu Undivided Family)	Resident Individual

Also Read: Provision-wise Analysis of Key Income Tax Changes vide Finance Bill 2020