Every family has regular medical expenses. This may be towards a health insurance premium, or expenditure related to a family member’s disability/critical illness. The Income Tax Act of 1961 has made provisions to reduce this burden through tax deductions under section 80D, 80DD, 80DDB. Read on to understand how to use these sections to your benefit.
Section 80D in Respect to Health Insurance Premiums
Investments made towards payment of health insurance premiums, qualify for a tax deduction under section 80D.
Available Deduction - For individuals less than 65 years of age, amount of health insurance premium paid or Rs. 15,000, whichever is lesser. For senior citizens above 65 years, amount of health insurance premium paid or Rs. 20,000, whichever is lesser.
A further deduction of Rs 15,000 could be claimed, for buying health insurance policy for your parents (Rs 20,000 if either of your parents is a senior citizen). This is irrespective of whether they’re dependent on you or not. No deductions can be claimed for in-laws.
Scope of Deduction - Individual assesses can claim deduction for premiums paid towards health insurance of self, spouse, parents and children.
For HUF assesses, premium paid for insuring the health of any member of the HUF, can be used for deduction.
Key Factors to keep in mind
- The premium may be paid by any mode of payment, other than cash.
- The health insurance premium that you pay must be from the taxable income applicable for the year you claim. Premiums should not be from gifts received by you.
- Part payment of premium is allowed. For example, suppose your parents contribute 50% of their health insurance premium and you pay the balance 50% of their premium. In such a case, you could avail the deduction for the amount contributed by you and your parents too could avail deduction for their contribution.
If you are incurring expenditure for the treatment of your handicapped dependent, you could claim a deduction under section 80DD.
Available Deduction - Rs 50000, or actual expenditure incurred, whichever is lesser. For severe handicap conditions Rs. 1,00,000 is the deduction limit.
Scope of Deduction - Deduction can be claimed for dependent parents, spouse, children and siblings. Dependents must not have claimed any deduction for their disability.
Deductions are permissible in either of the following cases.
a) Costs incurred for medical treatment, training or rehabilitation of a disabled dependent, including amount spent for nursing.
b) Amount paid towards an insurance scheme for the maintenance of your disabled dependent in case of your untimely death.
Meaning of Disability- Disability means a person suffering from 40% or more of any of the below disabilities. A severe disability condition is 80% or more of the disabilities.
a) Blindness and Vision problems
c) Hearing impairment
d) Locomotor disability
e) Mental retardation or illness
a) Individuals would need to produce a copy of the disability certificate as issued by the central or state government medical board to claim deduction.
b) Insurance policy obtained must be in your name and should be a policy for life. It could pay either an annuity or a lump sum amount for the benefit of the dependent on your death.
c) If the disabled dependent predeceases you, the policy amount is returned to you, and treated as income for the year in which you receive it, thus fully taxable in your hands.
Section 80 DDB for Treatment of Specified diseases
Costs incurred for treatment of specified illnesses, could fetch you a tax benefit under section 80DDB.
Available Deduction - For individual assesses less than 65 years of age, a deduction limit of Rs. 40,000 is applicable. For a senior citizen, the limit is Rs.60,000.
Scope of Deduction - Deduction is applicable for treatment of self, spouse, children, siblings, and parents, wholly dependent on you.
a) Neurological Diseases (where the disability level has been certified as 40% or more).
b) Parkinson’s Disease
c) Malignant Cancers
d) Acquired Immune Deficiency Syndrome (AIDS)
e) Chronic Renal failure
- If you are already receiving any reimbursement for the treatment from your insurance company or employer, deductions cannot be claimed. If you are receiving partial reimbursement, the balance amount can be used for a deduction.
- A certificate would be required from a specialist working in a government hospital, as proof for the specified ailment.
|Assessee entitled to deduction||Nature of Payment||Quantum of Deduction||Prescribed conditions|
|Individual or H.U.F. resident of India||Sum
Paid to effect or to keep into force an insurance on the health of
(i) In case of Individual-
(a) Individual himself, his spouse and dependant children.
(b) His parents or any contribution made to the Central Government Health Scheme or such other scheme as may be notified by the Central Government in this behalf.
(c) Preventive health check-up of the assessee or his family or his parents. (From the A.Y. 2013-2014 onwards).
(ii) In case of H.U.F.
(a) H.U.F. Himself
(b) Any Member of the family
(i) In case of Individual-
(a) Rs. 15000/-
(b) below 60 years - Rs. 15000/-
above 60 years Rs. 20000/-
(c) Rs. 5000 above 60 years Rs. 5000 below 60 years (65 Years applicable for the year AY 2012-13 as earlier year)
(a) H.U.F. Rs. 15000/-
(b) Where any member of H.U.F. is above the age of 60 years then up-to Rs. 20000/-
Deduction can be claimed only if insurance premium is paid in
accordance witht he Scheme framed in this behalf by the Genral
Insurance Corporation of India and approved by the Central Government/
Insurance Regulatory & Development Authority
(ii) The deduction is available in respect of insurance premium of mediclaim policy.
(iii) It is paid out of Income and chargeable to tax.
For deduction the payment shall be made, by any made including by cash, in respect of any sum paid on account of preventive health check up, any mode other than cash in all other cases not falling under it.
Example: An individual assessee pays (through any mode other than cash) during the previous year medical insurance premium, out of his taxable income, as under:
* Rs. 12000/- to keep in force an insurance policy on his health and on the health of his wife and dependant children.
* Rs. 17000/- to keep in force an insurance policy on the health of his parents.
Under the new provisions he will be allowed a deduction of Rs. 27000/- (Rs. 12000 + Rs. 15000) if neither of his parents is a senior citizen. However, if any of his parents is a senior citizen, he will be allowed a deduction of Rs. 29000/- (Rs. 12000 + Rs. 17000). Whether the parents are dependant or not, is not a consideration for deciding the deduction under the new provisions.
Further, in the above example, if cost of insurance on the health of the parents is Rs. 30000/- out of which RS. 17000/- is paid (by any non-cash mode) by the son and Rs. 13000/- by the father (who is a senior Citizen) out of their respective taxable income, the son will get a deduction of Rs. 17000/- (in addition to the deduction of Rs. 12000 for the medical insurance on self and family) and the father will get a deduction of Rs. 13000/-.