Section 80D of the Income Tax Act offers significant tax benefits to individuals who pay medical insurance premiums for themselves and their family members. This guide explains everything salaried employees need to know about claiming these deductions.
Basic Deduction Limits
For Individual Taxpayers (Below 60 Years)
- Health insurance premium for self, spouse, and dependent children: Up to ₹25,000
- Additional premium for parents:
- If parents are below 60 years: Up to ₹25,000
- If parents are senior citizens (60 years or above): Up to ₹50,000
For Senior Citizens (60 Years and Above)
- Health insurance premium for self and family: Up to ₹50,000
- Additional premium for senior citizen parents: Up to ₹50,000
- Maximum possible deduction: ₹1,00,000
What Expenses Qualify Under Section 80D?
Health Insurance Premiums
- Regular medical insurance premiums
- Critical illness policy premiums
- Group health insurance premium paid by employee
- Preventive health check-up expenses (up to ₹5,000)
Medical Expenditure
- For senior citizens who don't have health insurance
- Must be spent on medical treatment
- Maximum deduction of ₹50,000
Practical Examples
Example 1: Young Professional: Rahul (35 years) pays the following:
- Health insurance premium for self, spouse, and child: ₹20,000
- Health insurance premium for parents (aged 65): ₹45,000
- Preventive health checkup for family: ₹4,000
Total eligible deduction:
- For self and family: ₹24,000 (₹20,000 + ₹4,000)
- For senior citizen parents: ₹45,000
- Total deduction under Section 80D: ₹69,000
Example 2: Senior Citizen: Prakash (62 years) pays:
- Health insurance premium for self and spouse: ₹35,000
- Medical expenses for treatment: ₹30,000
- Health insurance for parents (aged 85): ₹48,000
Total eligible deduction:
- For self and spouse: ₹50,000 (capped at maximum limit)
- For senior citizen parents: ₹48,000
- Total deduction under Section 80D: ₹98,000
Important Points to Remember
Payment Methods
- Premium must be paid through non-cash modes
- Acceptable methods: cheque, net banking, credit/debit cards, UPI
- Cash payments are allowed only for preventive health checkups
Documentation Required
- Health insurance premium payment receipts
- Medical bills and prescriptions for senior citizens claiming treatment expenses
- Preventive health checkup receipts
- Form 16 from employer showing premium deduction (for group insurance)
Key Considerations
- Deduction is available even if dependent family members have income
- Premium paid for adult children not eligible
- Premium paid for in-laws not eligible
- GST charged on premium is eligible for deduction
Recent Updates and Changes
- COVID-19 related medical expenses can be claimed under this section as per specific guidelines
- Preventive health checkup limit of ₹5,000 is included within the overall section limit
- Digital premium payment is now mandatory except for preventive health checkups
How to Claim the Deduction
- Keep all relevant documents ready
- Declare the premium payments to your employer for TDS benefits
- Include the details in ITR Form while filing returns
- Maintain proof of payment for at least 8 years
- Submit Form 16 and premium receipts if asked by IT department
Common Mistakes to Avoid
- Not considering the age of parents while calculating limits
- Including premium paid for non-dependent family members
- Claiming cash payments except for health checkups
- Not maintaining proper documentation
- Missing out on preventive health checkup benefits
Following these guidelines will help salaried employees maximize their tax benefits under Section 80D while ensuring compliance with tax regulations. Remember to consult a tax professional for specific cases and updated regulations.