Section 80D - Deduction in respect of Medical Insurance Premium under IT Act

In the present scenario, due to the arise of Covid-19, many people are purchasing Health Insurance policies.

Premiums paid on such policies are eligible for deduction u/s.80D of Income Tax Act, which is discussed in detail below:-

In Case of Individual:-

(i) Deduction in respect of insurance premium paid for the family:-

Deduction to the extent of Rs.25000/- is allowed in respect of the following payments:-

• Premium paid to effect or keep in force an insurance on the health of self, spouse, and dependent children or

• Any contribution made to the Central Government Health Scheme or

• Such other health scheme as may be notified by the Central Government [Central Government Health Scheme (CGHS)].

(ii) Deduction in respect of insurance premium paid for Parents:-

Further deduction up to Rs.25000/-[1] is allowable to effect or to keep in force an insurance on the health of parents of the assessee.

(iii) Deduction in respect of payment towards Preventive Health Check-up:-

Deduction to the extent of Rs.5000/- shall be allowed in respect payment made on account of preventive health check-up of self, spouse, dependent children, or parents made during the previous year. However, the said deduction of Rs.5000/- is within the overall limit of Rs.25000/- or Rs.50000/-, specified in (i) and (ii) above.

(iv) Mode of payment for claiming Deduction u/s.80D:-

Payment can be made:-

• By any mode, including cash, in respect of any sum paid on account of preventive health check-up;

• By any mode other than cash, in all other cases.

(v) Deduction for medical expenditure incurred on senior citizens:-

Senior Citizens who are unable to get health insurance coverage can claim deduction up to Rs.50000/- which would be allowed in respect of any payment made on account of medical expenditure in respect of such person if no payment has been made to keep in force an insurance on the health of such person.

In Case of HUF:-

• Deduction under this section is allowable in respect of premium paid to ensure the health of any member of the family.

• Maximum deduction available to a HUF would be Rs.25000/- and in case any member is a senior citizen, Rs.50000/-.

• Further, the amount paid on account of medical expenditure incurred on the health of any member of a family who is a senior citizen would qualify for deduction subject to a maximum of Rs.50000/-, provided no amount has been paid to effect or keep in force an insurance on the health of such person.

Condition:-

• Premium should be paid by any mode, other than cash, in the previous year out of his income chargeable to tax.

Deduction where the premium for health insurance is paid in lump sum [Sec.80D (4A)]:-

• In a case where the insurance premium is paid in lump-sum for more than one year by:-

i. Individual, to effect or keep in force an insurance on his health or health of his spouse, dependent children or parents; or

ii. HUF, to effect or keep in force an insurance on the health of any member of the family,

then, the deduction allowable under this section for each of the relevant previous year would be equal to the appropriate fraction of such lump-sum payment.

Ex:-Mr. Praveen took health insurance policy effective for 2 years, policy commencing from 01-09-2020 on 25-08-2020 and made a lump sum payment of Rs.15000/- as premium.

Now, for F.Y 2020-21, the amount of deduction available to him under this section will be Rs.4375/- (9 Months -effective period [Sept 2020 to Mar 2021]).

Note:-

• In case the individual or any of his family members is a senior citizen, the aggregate of deduction, in respect of payment of premium, contribution to CGHS, and medical expenditure incurred, cannot exceed Rs.50000/-.

• In case one of the parents is a senior citizen who is covered under a medical insurance policy and another is also a senior citizen but not covered under a medical insurance policy, the aggregate of deduction, in respect of payment of medical insurance premium and medical expenditure incurred, cannot exceed Rs.50000/-.

[1] Quantum of deduction in case of senior citizen:- Increased deduction of Rs.50000/- (instead of Rs.25000/-) shall be allowed in case any of the persons mentioned above is a senior citizen (i.e., an individual resident in India of the age of 60 years or more at any time during the relevant previous year.)