Pravin
Premium paid for Health insurance is one of the most common deductions under the income tax. This deduction is in addition to the deduction of Rs.1.5 lakh under section 80C.
An individual can take the deduction of health insurance and preventive health check-up or medical expenditure fees paid for the following person-
- Self
- Husband/wife (Spouse)
- Dependent children
- Own parents (not spouse parents)
For this section spouse and dependent children are known as the family.
Deduction of premium paid for self and the family [u/s 80D(2)(a) & (c)]
Under this section, a taxpayer can get a deduction of Rs.25,000/- for health insurance and preventive health check-up paid for himself, spouse and dependent children.
If the taxpayer or any of his family member is of 60 years or more, the same deduction will be increased to Rs.30,000/-. From the financial year 2018-2019 [AY 2019-20], this deduction has been increased to Rs.50,000/-.
If the taxpayer or any of his family member is of 80 years or more and health insurance premium is not paid, a deduction of medical expenses up to Rs.30,000/- can be claimed. From FY 2018-19 this deduction has been increased to Rs.50,000/- and is also available to a person of 60 years or more.
However, the maximum deduction is limited to Rs.30,000/- only. [Rs.50,000/- from AY 2019-20]
Deduction of Premium Paid for Parents [u/s 80D(2)(b) & (d)]
A person can also get a deduction Rs.25,000 for health insurance and preventive health check-up paid for his parents. (Spouse parents are not covered)
In this case also, if parents age is 60 years or more the same deduction will be up to Rs.30,000/-. [From FY 2018-2019 it has been increased to Rs.50,000/-]
If the parents are 80 years or more and the premium is not paid for health insurance, than a deduction of medical expenses up to Rs.30,000/- is available. [From FY 2018-2019 it has been increased to Rs.50,000/- and is also available to a senior citizen i.e 60 yrs or more]
However, the total deduction for parents under this section will be limited to Rs.30,000/-. [Rs.50,000/- AY 2019-20]
Maximum Limit of deduction
| Limit of deduction under section 80D for AY 2019-20 | |||
| Situation | Deduction of (i) Health Insurance and preventive health check-up (ii) Medical expenses (only for very senior citizen) | Maximum Deduction | |
| Self, spouse and Dependent Children | Parents | ||
| Taxpayer, his family, and parents are below 60 years | 25,000 | 25,000 | 50,000 |
| Taxpayer and his family is below 60 years and his parents are 60 years or more | 25,000 | 50,000 | 75,000 |
| Taxpayer or his spouse is 60 years or more and his parents are also of 60 years or more | 50,000 | 50,000 | 1,00,000 |
Premium Paid in Advance [ u/s 80D(4A) ]
From FY 2018-19, deduction of health insurance shall be available only for the current financial year even if such premium is paid in advance.
Example- Mr. Chawla paid Rs.80,000 towards health insurance of his family on 01-04-2018. This premium will cover his family’s health for the next 4 years. In this case, for FY 2018-19, Mr. Chawla will get a deduction of Rs.20,000/- only. [ 80000 * 1/4 ]
Other Important points
- Total deduction of preventive health check-up for self, spouse, dependent children and parents is limited to Rs.5000 only.
- Cash payments are not available for deduction under this section. However, cash payment for preventive health check-up can be made.
- Dependent children is not defined under this section. Financial dependency should be considered in this case.
- Employer’s deduction for above health insurance is also available for deduction under this section.
- Medical Expense reimbursement by the employer up to Rs.15,000 is another deduction (under section 10) which is not related to section 80D. An employee can get both deductions simultaneously.
Example:
Mr. Ram (age 40 years) has made the following payments during the financial year 2018-19:
1) Payment of medical insurance premium on his policy of Rs. 15,000.
2) Payment of medical insurance premium on policy of his spouse Rs. 4,000.
3) Payment of medical insurance premium on policy of his younger daughter who is dependent on him Rs. 3,000.
4) Payment of medical insurance premium on policy of his elder daughter who is self-employed and not dependent on him Rs. 5,000.
5) Payment of medical insurance premium on policy of his parents (resident and aged 68 years), Rs. 18,000 on policy of his father and Rs. 18,000 on policy of his mother. Both are dependent on the brother of Mr. Raja.
6) Payment of Rs. 3,000 towards expenditure on preventive health check-up (for his own check-up and check-up of his wife).
Advice Mr. Ram regarding the admissible deduction under section 80D for the year 2018-19.
Solution:
Considering the above provisions, the deduction in case of Mr. Ram will be as follows:
1) Medical insurance premium on his policy of Rs. 15,000 will qualify for deduction.
2) Medical insurance premium on policy of his spouse of Rs. 4,000 will qualify for deduction.
3) Medical insurance premium on policy of Rs. 3,000 of his younger daughter who is dependent on him will qualify for deduction. However, premium of Rs. 5,000 on policy of elder daughter who is not dependent on him will not qualify for deduction.
4) Medical insurance premium on policy of his parents of Rs. 36,000 will qualify for deduction (being Senior Citizens).
5) Expenditure on preventive health check-up will also qualify for deduction, but, it will be restricted to Rs. 3,000 only (as the overall limit of deduction under section 80D in respect of assessee and his family cannot exceed Rs. 25,000).
Thus, total deduction under section 80D will amount to Rs. 22,000 (15000+4000+3000) on account of expenditure on premium paid in respect of his own health, health of his spouse and dependent daughter and Rs. 36,000 in respect of premium paid on policy of his parents.
Deduction on account of expenditure on preventive health check-up will be Rs. 3,000.
Total deduction under section 80D will amount to Rs. 61,000 (Rs. 22,000 + Rs. 36,000 +Rs. 3,000)
Example’s Source: Income Tax Tutorials
