Budget 2015 Update: The Deduction allowed under Section 80D is Rs. 15,000 and Rs. 20,000 (for Senior Citizens). Keeping into account the rising cost of Medical Expenses, Budget 2015 has increased the deduction allowed to Rs. 25,000 & Rs. 30,000 (for Senior Citizens).
Moreover, another change has also been brought in Section 80D with respect to very senior citizens i.e. individuals above 80 years of age. Very senior citizens are often unable to get health insurance coverage and are therefore unable to take tax benefit under Section 80D.
Accordingly as a welfare measure towards very senior citizens, it is proposed to provide that any payment made on account of Medical Expenditure in respect of very senior citizen shall be allowed as a deduction under Section 80D of a maximum of Rs. 30,000. However, this deduction shall only be allowed if no payment has been made to keep in force the health insurance of a very senior citizen.
The aggregate of health insurance premium and Medical Expenditure incurred in respect of such parents would be limited to Rs. 30,000.
The increased limit will apply from Financial Year 2015-16 onwards. Section 80D has been explained in detail below. The figures mentioned below are applicable for Financial year 2014-15. For Financial year 2015-16, the limit has been increased from Rs. 15,000 to Rs. 25,000 for Non-senior citizens and from Rs. 20,000 to Rs. 30,000 for Senior Citizens.
Section 80D: Medical Insurance Premium
Section 80D provides for tax deduction from the total taxable income for the payment (by any mode other than cash) of medical insurance premium paid by an Individual or a HUF. This tax deduction is available over and above the deduction of Rs. 1,50,000 under Sec. 80C.
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The deduction under Sec 80D is allowed for making a payment to effect or keep in force an insurance policy which:-
- In case of an Individual:- Is for the health of the assesse or on the health of the wife or husband, dependent parents or dependent children of the assessee, or
- In case of HUF: Is for any Member of the Family
Quantum of Deduction available under Section 80D
The Deduction that can be claimed under Sec. 80D at the time of filing of income tax return is the sum of the following:-
- In case the payment of medical insurance premium is paid by the assesse for himself, spouse, dependent children – Rs. 15000. In case, the person insured is a Senior Citizen, the deduction allowed should be Rs. 20,000.
- In case the payment of medical insurance premium is paid by the assesse for parents, whether dependent or not – Rs. 15000. In case the parents of the Assessee are Senior Citizens the deduction allowed under Section 80D should be Rs. 20,000.
As the health insurance cover for elderly comes at a relatively higher price, it is necessary to encourage senior citizens to get themselves medically insured and accordingly, the quantum of tax deduction allowed under section 80D in case the person insured is a senior citizen is Rs. 20,000 as stated above.
Thus, the total maximum deduction that can be claimed under section 80D is as follows
|Description||Medical Insurance Premium paid in respect of||Total Deduction under Sec. 80D|
|Self, Spouse & Dependent Children||Parents (whether dependent or not)|
|No-one has attained the age of 60 years||Rs. 15,000||Rs. 15,000||Rs. 30,000|
|Assessee and his family is less than 60 years & parents are above 60 years of age||Rs. 15,000||Rs. 20,000||Rs. 35,000|
|Assessee and his parents have attained the age of 60 years and above||Rs. 20,000||Rs. 20,000||Rs. 40,000|
The balance income of the taxpayer after allowing deductions would be taxable as per the income tax slabs of the taxpayer.
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Illustrative example on Section 80D
An Individual Assessee pays during a financial year, medical insurance premium as under:-
- Rs. 14,000 as insurance policy premium on his own health &
- Rs. 19,000 as insurance policy premium on the health of his parents
In the above mentioned scenario the assesse would be allowed a deduction of Rs. 29,000 (Rs. 14,000 + Rs. 15,000) in case neither of his parents is a senior citizen. However, if any of his parents is a senior citizen, he will be allowed a deduction of Rs. 33,000 (Rs. 14,000+ Rs. 19,000)
Further in the above example, if the cost of insurance on the health of the parents is Rs. 30,000/-, out of which Rs. 17,000 is paid by the son and Rs. 13,000 is paid by the father (who is a senior citizen), out of their respective taxable income, the son will get a deduction under Section 80D of Rs. 17,000/- (in addition to Rs. 14,000 on his health) and the father will get a deduction of Rs. 13,000.
Service Tax on Medical Insurance Premium
Service Tax also is levied on the amount paid as Insurance Premium. However, the service tax paid on medical insurance premium wont be allowed as a deduction under section 80D. Deduction under section 80D can be only claimed on the amount paid as Medical Insurance Premium and not on the service tax levied thereon.
Section 80D: Deduction for Preventive Health Check-up
A new deduction that has been allowed under this section is deduction for Preventive Health Check-up. A deduction of Rs 5000 would be allowed under Section 80D for payment of preventive health check-up of either the individual himself or his family members which include parents and dependent children.
This deduction of Rs. 5000 is not in addition to the deduction of Rs. 15000/Rs 20000 stated above but is included in the above deduction.
It is important to be noted that Rs. 5000 is the maximum total deduction allowed. This deduction is not per person but in total. So if a person pays any amount for preventive health check-up of himself + dependent children + parents, the gross total deduction allowed would be Rs. 5000. This deduction will apply from Assessment Year 2013-14 and onwards.
Section 80D is a complicated section for claiming deductions but it is a vital section for saving taxes. In case you have any queries with regards to Section 80D, feel free to post all your queries on our Q&A Portal i.e. www.forum.charteredclub.com