Medical Insurance ( Section 80D ) – Applicability, Deductions & Policies

Today we live in the most uncertain era of the human kind. It is almost impossible to predict or forecast the medical emergency, no matter how much we remain alert. Although we cannot avoid it completely, we can manage the financial part of the medical emergency by availing proper health insurance for ourselves and our family. To promote medical insurance, the government gives incentives to the citizens by providing tax relief against premium paid by the individual. You can claim deduction of premium paid for your medical policy through section 80D of Income Tax Act.

Applicability of Section 80D

Every individual and HUF can avail the benefit under Section 80D by purchasing medical insurance policy. The policy can be availed for yourself, your spouse, children and dependent parents. The tax benefit is in addition to regular deductions allowed under Sections 80C. Hence, when you purchase a health insurance policy, the effective cost of premium is reduced by the tax deduction available. The taxpayers in the highest tax bracket can avail maximum tax benefit by purchasing medical policy.

Deduction Limits

The amount of premium paid under medical insurance is deductible from the total income of the resident individual. The maximum amount deductible depends on the age of taxpayer and parents as below:

  • For individuals below 60 years, maximum allowed deduction is Rs.25000. If you buy the health insurance for parents, you can claim additional Rs. 25000 if parents are below 60 years of age.
  • In the case of individuals below 60 years but parents are aged above 60 years, you can claim Rs. 25000 for yourself and Rs.50000 for parents. Hence, cumulatively you can claim Rs. 75000 deduction from your total income.
  • If the taxpayer himself is above 60 years and parents are also above 60 years, total deduction allowed is Rs. 100,000 (Rs. 50000 for self and Rs. 50000 for parents).
  • Above limits are applicable for resident individuals only. In case of NRI and HUF taxpayers, total limit of premium deduction is Rs.25000 irrespective of age of insured.
  • If the premium amount is less than above prescribed limit, you can claim the deduction only up to premium paid.

Policies Covered

  • You can avail single policy for your family or take multiple policy depending on your need. For example, you can take one policy covering yourself, spouse and children. You would like to take a separate policy for parents. You can club both the policies to avail tax benefits under section 80D.
  • You can also buy a single premium policy and avail proportionate amount for the tax deduction every year. For example, if you have paid a single premium of Rs. 500,000 lacs for the mediclaim policy for 20 years, you can claim the deduction of Rs. 25000 every year under Section 80D.
  • Group health insurance policy bought by the corporate cannot be claimed by the employee for the deduction under section 80D.
  • You can avail the tax deduction for the amount paid from your account only. The premium paid in cash or paid by the other person cannot be granted to avail tax deduction under section 80D.