Section 80D: Tax benefits of health insurance and expenses

 

A major concern for every earning individual today, is the quantum of benefit gained from medical insurance policies in comparison to the medical expenses incurred at a time of illness, both for self and for family members. The first step towards a sound financial plan is to have access to adequate health insurance, and then to be aware of the benefits of the same. A major part of the young and professional Indian populace continues to ignore the need of having a holistic health and medical insurance. Unavoidable lifestyle issues such as erratic working hours, unhealthy food habits, use of alcohol and tobacco, and other lifestyle disorders have necessitated the need of having an adequate insurance plan.

In view of the unavoidable circumstances in which a majority of the young professional class finds itself with respect to work and personal lifestyle, a health insurance can go a long way in lending a sense of security and balance to their lives. Apart from benefits in terms of medical expense coverage, health insurance policies also provides tax benefits. Tax benefit is provided in such a way that it reduces the taxable income and thereby the tax liability of an individual tax payer.

 

Listed below are the benefits under various provisions of the Income Tax Act, 1961, with regard to medical insurance and medical expenses.

 

HOW MEDICAL INSURANCE BENEFITS A TAXPAYER

Health insurance policy provides various benefits to a taxpayer. As per section 80D, the following deductions can be claimed by an individual or HUF (from income of all heads):

  • Medical insurance premium paid by taxpayer
  • Contribution by taxpayer to a Central Government health scheme
  • Amount paid by an individual for preventive health check-up
  • Expenses incurred for the upkeep of health of a very senior citizen (resident individual who is 80 years of age)

 

AMOUNT OF DEDUCTION THAT CAN BE AVAILED BY AN INDIVIDUAL AND HUF:

The list below shows the amount to the extent of which a taxpayer can claim a deduction for medical insurance and medical expenses:

Section 80D:

 

Health Insurance_tax benefit

All expenses above can be claimed as deduction only if it is paid in any mode other than cash payment (is through ECS, cheque etc)

Preventive health check-up: Section 80D also provides that where any expense has been incurred for preventive health check-up, such expense should not exceed Rs 5,000.  Interestingly, this deduction can be claimed even if such expense is incurred through cash payment.

 

Section 80DD:

For an individual or HUF: Incurring expenses on maintenance of dependant with disability, Rs 75,000 can be claimed in case of disability and Rs 1,25,000 can be claimed as deduction on account of severe disability.

 

SECTION 80DDB:

Deduction vis-a-vis medical expenses on self/relative to the extent of Rs 40,000 or the amount incurred by assessee (whichever is less).

For very senior citizen, the deduction can be claimed up to Rs 80,000 and up to Rs 60,000 for senior citizens.

 

SECTION 80U:

Deductions vis-a-vis persons with physical disability (blindness, mental retardation etc) can be claimed up to Rs 75,000 (FY 2015-16) and for severe disability the amount can be claimed up to Rs 1,25,000.

 

Conclusion: The premium paid on health insurance not only gives health cover to those suffering from uncertainties surrounding health and wellness, but also aids in saving taxes. In view of rising medical expenses, health insurance can go a long way in providing security and an added tax benefit to individuals of all ages, to the taxpayer as well as to his/her family members. It is for these reasons that more and more people especially the younger professional class, should be educated about the facts and provisions of the tax benefits of medical insurance and medical expenses, so that our country as a whole can benefit as a result of lower tax liabilities and a greater degree of security to all its citizens.

 

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