Section 80D of The Income Tax Act, 1961 corresponds to the amount of deduction allowed to an assessee on his medical insurance and health checkup.
The amount spent by an assessee (Individual/HUF) on paying the premium of a medical insurance is allowed for deduction under Section 80D. This amount is to be spent by the assessee on himself or on his immediate family members on an insurance taken under an approved Central Government scheme. The maximum amount allowed as a deduction has been amended as per the Finance Act, 2015.
Tax Benefits of Medical Insurances
Medical insurances provide medical cover to the assessee. They also offer certain benefits while payment of tax. Not all payments made regarding a medical insurance are eligible for deduction. The ones allowed for deduction are:
⦁ Medical insurance premium paid by assessee, being individual/HUF by any mode other than cash
⦁ Any contribution made by assessee, being individual to Central Government Health Scheme or such other Scheme as may be notified by the Central Government.
⦁ Sum paid by assessee, being individual on account of preventive health check-up. Medical expenditure incurred by assessee, being individual/HUF on the health of a very senior citizen person provided that no amount has been paid to effect or to keep in force an insurance on the health of such person.
Policy in Whose Name?
As per the AY 2017-17, the deduction to be claimed under section 80D shall be available to the policy holder. For an individual, the following policies taken are allowed as a deduction:
⦁ in his own name
⦁ in the name of spouse
⦁ in the name of dependent children
⦁ in the name of parents
Policy can be taken for the health of any member in case of HUF.
Amount Allowed for Deduction
The payments made by the assessee shall be allowed for deduction under section 80D to a certain limit.
1. For an Individual:
⦁ Rs. 25,000, in aggregate, in respect of medical insurance premium or any payment made for preventive health check-up (payment made for the assessee himself, the spouse or the dependent children)
⦁ Rs. 25,000, in aggregate, in respect of medical insurance premium or any payment made for preventive health check-up (payment made for parents)
⦁ Rs 25,000 in aggregate in respect of contribution made to the Central Government Health Scheme or any scheme notified by the Central Government (payment made for the assessee himself, the spouse or the dependent children)
⦁ Rs 30,000 in aggregate in respect of medical expenditure incurred on the health of assessee, himself, his/her spouse or dependent children or parents (only if payment made is for a very senior citizen)
It should be kept in mind that only Rs 5,000 shall be available as a deduction in aggregate for preventive health check up.
2. For HUF:
The deduction allowed for the amount paid for the health benefit, in aggregate, shall not exceed Rs. 25,000, for any member.
However, the limit shall exceed to Rs. 30,000 if the insurance premium paid is for a senior citizen.
Mode of Payment
Payments made in any mode, except cash, are allowed as a deduction under section 80D. However, payments made for preventive health check up can be made in cash. The said shall be eligible for deduction.
Central Government Approved Schemes
A number of medical insurances have been approved by the Central Government. Insurance taken under these schemes are eligible for deduction.
1. Rashtriya Swasthya Bima Yojana
2. Employee State Insurance Schemes
3. Central Government Health Schemes
4. Aam Aadmi Bima Yojana
5. Janashree Bima Yojana
People still consider medical insurances as impractical. Hence, in the time of need, medical bills are paid out-of-pocket. To prevent this loss, awareness is being spread about medical insurances. Section 80D of the Income Tax Act just provides one of the perks of having a medical insurance.