Health insurance through the IT deduction prism: Know the details of section 80D of IT Act

The last date for filing an income tax return (ITR) for the fiscal year 2020-21 is September 30. Before filing ITR one has to know the details of all types of tax deductions. Health insurance offers benefits of tax deduction to an individual. The relevant part of the Income Tax Act 1961 is section 80D. If you are going to file your ITR, please be updated about your health insurance expenditure since it can offer you an income tax deduction of up to Rs 1 lakh. So, before filing ITR consult your tax advisor and proceed accordingly. Money9 gives you a guide on how you can save up to Rs 1 lakh from only medical or health insurance policies.

Section 80D

Section 80D of the IT Act allows for the deduction for money spent on premiums towards you and your family’s health insurance and assumes great significance in your tax planning.

The amount spent as a premium for the health insurance policy for self and family members including parents is eligible for this deduction. The deduction range varies from Rs 50,000 to Rs 1 lakh depending upon the age of the tax payer and his/her parents, said Arvind Agarwal, an IT expert.

Limit under Section 80D

An individual can claim a deduction of Rs 25,000 under section 80D on insurance for self, spouse and dependent children. An additional deduction for the insurance of parents is available up to Rs 25,000 if they are less than 60 years of age.

If the parents are aged above 60, the deduction amount is Rs 50,000. If both taxpayer and parents are 60 years or above, the maximum deduction available under this section is up to Rs 1 lakh – Rs 50,000 for self and Rs 50,000 for parents.

Scenario 1: Arun is 31 years old and his parents are 53 and 59 years of age. Arun can get a maximum deduction of Rs 50,000 under section 80D.

Scenario 2: Arun is 37 years old and his parents are 61 and 68. In this situation, Arun can get a maximum deduction of Rs 75,000.

Scenario 3: If Arun is 60 years of age and his mother is 83 and his father is no more, he can get an IT deduction of Rs 1 lakh under section 80D.

Preventive healthcare expenses

If the total insurance premium paid is less than the maximum allowed limits for any of the categories, then up to Rs 5,000 can be claimed for a preventive health check-up for your family in a financial year within the said limits, said Arvind Agarwal.

Section 80DDB

Income tax deduction for medical expenditure on self or dependent relative is covered under section 80DDB of the IT Act. An amount maximum of up to Rs 1 lakh is permissible under this section as well.

A deduction of up to Rs 40,000 is available to an individual. It is available with respect to any expense incurred towards the treatment of specified medical diseases for himself or any of his dependents.

In case of persons above 60 or 80 years of age the individual taxpayer can claim a deduction up to Rs 1 lakh per fiscal year subject to some restrictions, added Agarwal.