Tax is a compulsory liability for any income-earning citizen of the country. System of taxation in India dates back to ancient times. There are two types of taxes levied in India –direct and indirect tax. System of taxation is based on the theory of maximum social welfare. In India, levying, administration, collection and recovery of tax is regulated by the Income Tax Act, 1961 which was passed in consultation with the Ministry of Law. Income Tax Act has provided various provisions for levying income tax for both incomes received and yet to be received.
Income arising to any person is classified under various headers for the purpose of taxation and treated differently as per the provisions of the Income Tax Act, 1961. There are also provisions for taxpayers to an avail tax deduction to bring down the total taxable income and reduce the payment of tax. In this article, let’s learn about tax benefits available under Section 80D of the Income Tax Act, 1961.
Applicability of Section 80D
Section 80D of the Income Tax Act, 1961 provides for the deduction of tax from total taxable income for the payment of medical insurance premium paid by an individual or a Hindu Undivided Family (HUF). The tax deduction under Section 80D is over and above the limit of deduction under Section 80C/CCC/CCD of the IT Act. For individuals, tax deduction under Section 80D can be availed for the medical insurance premium paid for insuring self, spouse, dependent children and parents. For HUF, tax deduction under Section 80D can be availed for the medical insurance premium paid for any member of the Hindu Undivided Family.
Quantum of tax deduction allowed under Section 80D of the Income Tax Act, 1961
Tax deductions allowed under Section 80D varies for each category. Let’s take a look
- For individual: An individual can avail tax benefit under Section 80D of the Income Tax Act for the payment of medical insurance premium for self, spouse, dependent children and for parents. Up to INR 25,000 can claim for the medical insurance of self, spouse and dependent children. For insuring parents, an additional benefit of up to INR 25,000 can be availed if parents are aged below 60 years. In case, parents are above 60 years of age, the limit is INR 50,000.
- For HUF: HUF members can avail tax benefit under Section 80D of the Income Tax Act for the payment of medical insurance premium of up to INR 25,000
Below table indicates the benefits available for each category in different scenarios.
|Scenarios||The maximum premium for self, spouse and dependent children||Maximum premium for parents (dependent/non-dependent)||Total deductions available under Section 80D of the IT Act|
|All members of the family(self, spouse, children and parents) < 60 years of age||INR 25,000||INR 25,000||INR 50,000|
|Self, spouse and children < 60 years age
Either of the parents > 60 years age
|INR 25,000||INR 50,000||INR 75,000|
|Self > 60 years age
Spouse and children < 60 years of age
Parents > 60 years age
|INR 50,000||INR 50,000||INR 1,00,000|
|Members of Hindu Undivided Family||INR 25,000||INR 25,000|
Let us understand this with an example:
Rahul is 37 years old:
|Health Insurance Premium Paid||Tax eligibility U/S 80D||Rahul’s Tax Exemption|
|Premium for self/spouse/children||INR 32000||INR 25000||INR 25000 (Upto the 80D limit)|
|Premium for his father (66 years)||INR 37000||INR 50000||INR 37000 (Total premium paid since premium paid<80D limit)|
|Total||INR 69000||INR 75000||INR 62000|
The tax deduction limit provided under Section 80D of the Income Tax Act, 1961 includes some more things mentioned below.
- Preventive health check-up:
Deduction of INR. 5,000 is allowed under the section for payments towards preventive health check-up. This includes the preventive health check-up expenses incurred for the individual himself or to his spouse, dependent children or for parents. However, the deduction of INR. 5,000 is within the overall limits of INR 25,000 or INR. 50,000 for senior citizens
- Single premium health insurance policies: You can avail tax deduction benefits for single premium health insurance policies that provide long-term cover with a lump sum payment of premium. In this case, the appropriate fraction of the total premium paid is considered for the year for a tax deduction. Again, the limit applicable is same here also, which is INR 25,000 / INR. 50,000 depending on the age
Things to keep in mind before investing in medical insurance policies
With the tax perspective, below are certainly important things to keep in mind before investing in medical insurance policies:
- To avail the tax benefit, payment of premium can be made in any mode other than cash
- Premiums paid for insuring the health of grandparents, siblings, working children or any other relatives is not eligible for tax deduction under Section 80D of the Income Tax Act, 1961 Premiums paid for insuring self, spouse, dependent children and parents are only considered for tax deduction under Section 80D of IT Act
- Tax deduction of INR. 50,000 limit is applicable for senior citizens who are 60 years and above and are residents in India
- Service tax and cess portion of the premium are not considered for tax deduction
- Employer sponsored health insurance schemes are not eligible for this deduction under Section 80D of the Income Tax Act, 1961
Tax deductions are allowed on various investment products under various sections of the Income Tax Act, 1961. Let’s take a look at some of the important investments that can qualify for tax deductions:
|Section||Investments eligible for deduction||Maximum limit (FY 2018-19)|
|80C||Investment in Public Provident Fund, Life insurance, Sukanya Samriddhi Yojana, Five year bank deposit, Equity linked savings schemes, Senior citizen savings scheme, National savings certificate, home loan principal payment, Notified NABARD bonds and children’s tuition fees||INR 1,50,000|
|80CCC||For amount deposited in pension plans or annuity plan of LIC or any other insurer|
|80CCD(1)||Employee’s contribution to NPS account|
|80CCD(2)||Employer’s contribution to NPS account||Maximum up to 10% of salary|
|80CCD(1B)||Additional contribution to NPS||INR 50,000|
|80CCG||Rajiv Gandhi Equity Scheme for investments in Equities||Lower of INR 25,000 or 50% of invested amount in equity shares|
|80E||Interest on education loan||Interest paid for a period of 8 years|
|80EE||Interest on home loan for first time home owners||INR 50,000|
|80D||Medical Insurance – Self, spouse, children > 60 years age||INR 25,000|
|Medical Insurance – Parents more than 60 years of age||INR 50,000|
To claim a tax deduction, it’s important to produce the documentary proofs at the time of filing income tax along with other ITR filing documents.
Frequently Asked Questions (FAQs)
- How income is classified for tax payment purposes?Income is classified under below mentioned header for tax payment purposes:
- Income from house property
- Profit and gains of profession or business
- Capital gains
- Income from other sources
- Who can avail tax deductions under Section 80C of the Income Tax Act, 1961?Individuals and Hindu Undivided Family (HUF) can avail tax deductions on various investments under Section 80C of the Income Tax Act, 1961.
- I am paying INR 40,000 for mediclaim premium for the floater policy covering myself, spouse and school going child. I am also paying 30,000 premium each for my parents aged 64 and 61 years. How much mediclaimdeductions I can avail under Section 80D of the Income Tax Act, 1961?You can avail mediclaimdeductions of 25,000 for self and family and INR. 50,000 for your parent’s mediclaim policy. Total mediclaim deduction that you can avail under Section 80D of the Income Tax Act, 1961 is INR 75,000 (25,000+50,000) in this case.
- What does Section 80DDB of the Income Tax Act, 1961 cover?Section 80DDB of the Income Tax Act provides for the tax deduction of medical expenditure incurred on self and dependent relatives for specified illnesses (in Rule 11DD). The limit of deduction for less than 60 years old is INR 40,000 or actual expenses incurred, whichever is lower. The limit of deduction for more than 60 years old is INR 1, 00,000 or actual expenses incurred, whichever is lower.
- What are the income tax provisions under Section 80DD of the Income Tax Act, 1961?Section 80DD of the Income Tax Act, 1961 provides for the tax deduction on medical treatment expenses for handicapped dependent or amount paid to specified scheme for maintenance of handicapped dependent. In case disability is 40% or more but less than 80%, the amount eligible for deduction is INR 75,000. In case disability is more than 80% then amount eligible for deduction is INR 1, 25,000.