Deductions

Tax deduction for medical expenditure and health insurance

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Introduction

Not every employer provides medical facilities to its employees. Generally, government organisations provide reimbursement for the majority of the medical expenses incurred by its employees. Whereas private organisation purchases group medical insurances and offer the same to its employees as a part of their compensation package.

In case an employer does not provide medical insurance/expense reimbursement then employees may purchase medical insurance policies on their own. To promote health insurance plans, a deduction is allowed under Section 80D in respect of premium paid towards health insurance policies and medical expenditure incurred (in case the policy was not taken).

Who can claim a tax deduction?

Every individual can claim deduction under Section 80D in respect of the premium paid for medical insurance or medical expenditure incurred for:

  1. Himself
  2. Spouse (wife/husband)
  3. Dependent children
  4. Parents (dependent or independent)

HUF can claim the deduction of the medical insurance premium paid for any of his members.

Who is not eligible for this tax deduction?

Tax deduction shall be allowed to a person only if he pays himself for the medical insurance policies. If a husband pays for family medical insurance policies, his wife cannot claim the deduction for such payment.

No deduction shall be allowed to an individual if he pays to obtain a medical insurance policy for:

  1. Independent Children
  2. Mother-in-law or Father-in-law
  3. Brother or Sister
  4. Grandfather or Grandmother

What kind of payment is allowed as a deduction?

Deduction under Section 80D is allowed for the following payments:

  1. Medical Insurance premium
  2. Contribution towards the Central Government Health Scheme (CGHS)
  3. Payment for preventive health check-ups.
  4. Medical Expenditure of Senior Citizens.

The Central Government Health Scheme was started under the Indian Ministry of Health and Family Welfare in 1954 with the objective of providing comprehensive medical care facilities to Central Government employees, pensioners and their dependents residing in CGHS covered cities.

The deduction shall be allowed only if payment for the medical insurance premium and CGHS is made by cheque or online payments. However, for preventive health check-ups, a person can make the payment in any mode including cash.

How much deduction is allowed?

[Family] Deduction up to Rs. 25,000 is allowed in respect of premium paid by the person for medical insurance, or for a contribution towards CGHS, for himself, his/her spouse and dependent children. If the age of any family member is above 60 then the limit is Rs. 50,000.

[Parents] Additional deduction of up to Rs. 25,000 is allowed in respect of premium paid by a person for medical insurance for his parents. If the age of parents is above 60 then the total deduction can reach up to Rs. 50,000.

[Medical Expenditure] Medical expenditure incurred on the health of Senior Citizen (age is above 60 years) is allowed as a deduction up to Rs. 30,000. The deduction for medical expenditure is allowed only if no health insurance was taken for such senior citizen.

[Preventive Health check-up] An additional deduction of up to Rs. 5,000 is allowed for the amount incurred on preventive health check-up of individual himself, spouse (wife/ husband), dependent children and parents.

[Total Deduction] Maximum deduction allowable to an individual under Section 80D shall be between 50,000 to 100,000. If none of the family members is a senior citizen (i.e. less than 60 years of age), the deduction shall be limited to Rs. 50,000. If either parents or any of his family member is a senior citizen (i.e. above 60 years of age), the deduction shall be up to Rs. 75,000. If parents and any of family member is a senior citizen, the deduction up to Rs. 100,000 can be claimed under Section 80D. A summary of deduction allowable under Section 80D is explained in the below table:

Frequently Asked Questions

Is Section 80D deduction available for overseas health insurances?

Yes, deduction is also available for overseas medical insurance policies.

Is GST on medical insurance premium deductible under Section 80D?

The GST paid on the medical insurance premium is not allowed as a tax deduction.

Whether Section 80D deduction can be claimed for payment made in cash?

Only the payments made by any means other than cash shall be eligible for deduction. However, payment for preventive health checkup made by cash can be claimed as deduction.

Whether Section 80D deduction can be claimed for premium paid for more than one year?

In case of single premium health insurance policies having cover of more than one year, then the deduction shall be allowed on proportionate basis for the number of years for which health insurance cover is provided, subject to the specified monetary limit.

Do I need to produce any documents to claim deduction under Section 80D?

Section 80D doesn’t specify any document an assessee should arrange to claim this deduction. However, documentary evidence in support of medical premium and medical expenditure should be retained by the assessee, i.e., premium receipt, invoice, test reports, etc.

What is Preventive Health Checkup for Section 80D deductions?

Preventive health check-up would mean actions taken for examination of the vital functions of the body to ascertain its functioning and/or disorders, so as to prevent any ailment or diseases and ensure physical well-being. Actions contemplate carrying out various tests relating to vital functions of the body, like, examination of blood, heart functioning, liver functioning, kidney functioning, etc. The hospitals and other institutions offer various health check-up programs and facilities, for the purpose. Any expenditure incurred on such health check-up should be eligible for the deduction.

Which medical expenditure is eligible for Section 80D deduction? Medical expenditure has not been defined anywhere in the Act, thus, deduction under Section 80D should be allowed for all medical expense, including consultation fees, medicines, hearing aids and so on. Where medical expenditure has been incurred for treatment of certain specified illnesses, a deduction of up to Rs. 100,000 should be claimed under Section 80DDB. If you have exhausted the limit under this section, you can claim deduction for the remaining medical expenses under section 80D, provided such expenses have been incurred for a person aged 60 years and above and he was not covered under any health insurance policy.

Can an individual claim tax deduction simultaneously for HRA and home loan interest?

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