Tax Deductions for Medical Expenses Under Section 80D

All You Need to Know About the Provisions of Section 80D of the Income Tax Act

Section 80D of the Income Tax Act allows for a tax deduction on the medical expenses incurred for the care and treatment of senior citizens. This tax deduction can either be claimed by the senior citizen in question or by his/her children or primary caregivers who are incurring medical expenses on behalf of the senior citizen.

One of the only conditions for tax deduction under Section 80D is the medical expenditure must be undertaken on behalf of parents or family members aged sixty or above. Under the law, ‘family member’ is defined as the beneficiary himself or herself, their spouse, as well as any dependent children.

Another condition for this deduction states that the person for whom the medical expenses are being incurred should not be covered by a health insurance plan. If such coverage is available, then the deductions under Section 80D can be claimed for the yearly premiums paid on the health insurance policy.

Hence, if you are a person over the age of sixty, you can claim the tax deductions under Section 80D for your own health insurance premiums or for actual medical expenses, if you’re uninsured. A person who has incurred the same medical expenses for a parent or a spouse may also claim the above-mentioned deductions.

Section 80D and Medical Emergencies

Medical emergencies always take people by surprise, which is why it is important to plan for them in advance and save adequate money to be able to handle unforeseen healthcare costs. Therefore, an emergency fund or a medical insurance policy is an essential part of any well-rounded insurance portfolio.

This is why the government allows individuals to claim tax deductions on health insurance premiums paid for the coverage of elderly family members under Section 80D of the Income Tax Act, 1961. A Hindu Undivided Family (HUF) or an individual can claim a tax deduction for the part of their yearly income that is spent on paying insurance premiums for family members who are sixty years of age or older.

Deductions can also be claimed on premiums paid for health insurance plans purchased for the buyer’s parents or spouse. Insurance policies purchased for any dependent children would also fall within the purview of this section if the children happen to be older than sixty at the time. The deductions claimed under Section 80D are over and above those which can be availed under Section 80C.

Rate of Tax Deduction Under Section 80D

A tax deduction of up to Rs. 25,000 can be claimed by an individual for insuring themselves, their spouse, and any dependent children, where applicable. For the health insurance policy purchased for aged parents, an individual can claim an additional deduction of Rs. 25,000 in case the parents are less than sixty years of age and Rs. 50,000 if the parents are older than sixty.

If the taxpayer, as well as their parents, are over sixty years of age, then a maximum tax deduction of Rs. 1 lakh can be claimed under Section 80D for health insurance premiums and medical expenses. Beyond that, the Income Tax Act does not explicitly define the phrase ‘medical expenditure’, giving taxpayers a certain degree of freedom when it comes to claiming tax deductions for health-related expenses.

Expenses such as drugs and medicines, physician consultation fees, hearing aids, and various types of medical devices can all fall within the purview of ‘medical expenses’ under the current system. Provided that the person claiming deductions satisfies the two above-mentioned conditions, any and all of these expenses can be utilized under Section 80D to gain some tax relief.

On the other hand, a Hindu Undivided Family or HUF can claim tax deductions under Section 80D for health insurance policies purchased for any of the members of the HUF who are above 60 years of age. This deduction can be no more than Rs. 50,000 in accordance with the stipulations of Budget 2018. Furthermore, some deductions (up to Rs. 5,000) can also be claimed for preventive health checkups of senior citizens.

Single-Premium Medical Insurance

Section 80D of the Income Tax Act, FY 2018-19 also introduced a new provision that allowed taxpayers to claim deductions for single-premium health insurance plans. A single-premium medical insurance policy is essentially just a financial product where the buyer makes a lumpsum premium payment for an insurance policy that will be valid for more than a single year.

Hence, one can pay a large-one time premium for a health insurance plan that will provide them with coverage for an entire decade, without them needing to pay any more premiums for the next nine years.

Under Section 80D of the Income Tax Act, the individual buying a single-premium health plan can claim a tax deduction proportionate to the lumpsum amount that they have paid. This proportionate amount can be calculated by dividing the one-time premium paid by the number of years that coverage will be provided under the policy. Rs. 50,000 is the maximum deductible amount for a single-premium insurance plan.

Concluding Notes

Before buying health insurance or claiming deductions under Section 80D of the Income Tax Act, taxpayers should always consult a qualified and registered financial planner. This will allow them to minimize their tax liability while simultaneously getting the best possible coverage under their health insurance policy.

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