Section 80D - Deductions, Tax Benefits, Claim Amount, Example

You would have heard of various tax-saving investments under section 80C. Such instruments give you a benefit of deduction from your income up to a sum of Rs. 1,50,000 every financial year. This means, by investing in these instruments, you can save up to Rs. 46,800 every year if you fall in the highest tax bracket of 30%.

Well, there is some good news. You can save tax over and above the savings from section 80C by paying your health insurance premium every year. This deduction is covered under section 80D of the Income Tax Act.

What is Section 80D?

Mediclaim policies have been growing in popularity over the previous decade. It provides medical cover to the insured in case of any ailments or health problems. Health insurance policies help protect one’s savings in case of emergencies. In order to encourage individuals to take health policies, the government offers certain tax benefits on the premium you pay for yourself, your family or your parents. Section 80D of the Income Tax Act lays down the rules with regards to the payment of the premium and tax benefits related to it.

In what cases can one claim tax benefits under section 80D?

An investor can claim for the premiums paid for health insurance for self, family (spouse and children below 18) and parents. The deduction is not available for premiums paid on behalf of siblings or other relatives.

What is the amount that one can claim u/s 80D?

  1. Investors who are under the age of 60 can claim a maximum of Rs. 25,000 per year against the health insurance premium paid. This is inclusive of premiums paid for self, spouse, dependent children (below 18 years).
  2. The investor may also claim Rs. 25000 as the deduction of premium paid for the health insurance of his parents.

Important to note here is, that if the investor’s parents age is above 60 then the limit for point 2 above increases to Rs. 50,000/-.  In case the individuals own age is over 60, the limit for point 1 also increases to 50,000/-. The table below explains this clearly.

 Maximum Benefit u/s 80D
Self + Spouse + Kids (below 18)Rs. 25,000
Self + Spouse + Kids (below 18) + Parents (Below 60)Rs. 25,000 + Rs. 25,000
Self + Spouse + Kids (below 18) + Parents (Above 60)Rs. 25,000 + Rs. 50,000
Self (Above 60) + Spouse + Kids (below 18) + Parents (Above 60)Rs. 50,000 + Rs. 50,000

 

Also Read: What is Bharat Bond ETF: Meaning, Benefits, Price, Interest Rate, Review

Section 80D Examples

We will now try to understand the above with the help of some examples.

Ex A – Mr. X is a 31-year-old businessman and lives with his spouse and a 4-year-old daughter. He also has his parents along with who are aged 58 and 56. X pays a yearly premium of Rs 20,000 for his family. In addition, he also pays an annual health insurance premium of Rs. 30,000 for his parents.

In the above case, even though Mr. X pays a total premium of Rs. 50,000, he can only claim tax-saving benefits for Rs. 45,000 under section 80D. He can claim the entire deduction of Rs. 20,000 that he pays as premium for himself, his spouse and kid. However, the actual premium paid for his parents exceeds the maximum claimable. Hence, he will only get a benefit of Rs. 25,000 and not Rs. 30,000.

Therefore, total deduction u/s 80D is Rs. 45,000 (Rs. 20,000 + Rs. 25,000).

Ex B – Mr. Y is a salaried 45-year-old individual. He lives with his wife, 2 children and his mother who is 69. Mr. Y pays an annual premium of Rs 28,000 (for self+spouse+2 kids), and Rs 59,000 (for mother).

In the above case, even though Mr. Y pays a total premium of Rs. 87,000, he can only claim tax-saving benefits for Rs. 75,000 under section 80D. He can claim a maximum deduction of Rs. 25,000 as premium paid for himself, his spouse and kid, even though he actually pay 28,000. Similarly, he can claim a maximum of Rs. 50,000 for the premium paid for his mother, even though the actual payment is Rs. 59,000.

Therefore, total deduction u/s 80D is Rs. 75,000 (Rs. 25,000 + Rs. 50,000).

Benefits of a Health Insurance

The advantages of health insurance are not restricted to its tax benefits. Even though the claimable premium deductions work as a good incentive, even without them health insurance is highly recommended. Some of the major advantages are listed below.

  • Coverage against medical expenses
  • Coverage against critical illnesses
  • Cashless benefits
  • Protection over and above your employer cover

Read More: 

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Deductions under Section 80TTA

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