The pandemic shook the world. Along with many different changes, it also made people realise the need for financial coverage during medical emergencies. Health insurance has become an absolute necessity in today’s world. In addition to providing financial cover for medical expenses it also helps you save money while filing the income tax return.
In simple words, the Income Tax Act has such provisions that give you tax benefits for getting a health insurance policy. It does this by allowing tax deductions on insurance premium payments. There are primarily three sections under which these deductions are allowed. These sections are – Section 80D, Section 80DD, and Section 80DDB.
In this blog, we have discussed all you need to know about tax deductions under these sections for medical expenses and health insurance policy premiums.
Deduction Under Section 80D
Section 80D allows an individual or HUF to claim a deduction on health insurance policy premiums paid. It also covers top-up health and critical illness plans. The best part of this section is that it also covers insurance plans for spouses, dependent parents, and dependent children. Let us look at the payments which can be claimed for deduction under this section.
- The health insurance premium paid for self, spouse, dependent parent, or children. The mode of payment must not be cash.
- Money spent on preventive health check-ups.
- Medical expenditure paid for senior citizens even if they are not covered under any health insurance policy.
- Sum contributed to any Central Government health scheme
Deduction Amount Under 80D
Under this section, a person can get a deduction of Rs. 25,000 for insurance premiums paid for self, spouse, and dependent children (self and family less than 60 years). It also allows for a further deduction of Rs. 25,000 for the premium paid for parents (below 60).
In case the parents are senior citizens, the deduction amount rises to Rs. 50,000. If the assessee is a senior citizen, the deduction amount will be Rs. 50,000. These amounts are inclusive of Rs. 5,000 deductions provided for a preventive health checkup.
| Particulars | Deduction amount |
| Medical insurance premium paid for self, spouse, and dependent children (when everyone is below the age of 60) | Rs. 25,000 (includes Rs. 5000 for preventive health check-up) |
| Medical insurance premium paid for parents (parents are below the age of 60) | Rs. 25,000 (includes Rs. 5000 for preventive health check-up) |
| Medical insurance premium paid for parents (parents are above the age of 60) | Rs. 50,000 (includes Rs. 5000 for preventive health check-up) |
| Medical insurance premium paid for self, spouse, and dependent children (individual is above the age of 60) | Rs. 50,000 (includes Rs. 5000 for preventive health check-up) |
Let us take a look at the maximum limit for deductions in different scenarios.
- When parents and self/spouse/dependent children are senior citizens: Rs. 100,000 (Rs. 50,000 for a premium paid for self, spouse, and dependent children, and Rs.50,000 for a premium paid for parents)
- When parents and self/spouse/dependent children are below the age of 60 years: Rs. 50,000 (Rs. 25,000 for a premium paid for self, spouse, and dependent children, and Rs.25,000 for a premium paid for parents)
- When self/spouse/dependent children are below the age of 60 years but parents are senior citizens: Rs. 75,000 (Rs. 25,000 for a premium paid for self, spouse, and dependent children, and Rs. 50,000 for the premium paid for parents)
Deduction Under Section 80DD
Under Section 80DD, individuals and HUF can claim a deduction if they take care of a differently-abled dependent person. To claim the deduction, they must satisfy the following conditions:
- The deduction is for the differently-abled dependent person.
- The dependent person must not have claimed a deduction under section 80U.
- The disability of the dependent person must not be less than 40%.
- Money is incurred for the treatment, training, and rehabilitation of the dependent person.
Deduction Amount Under 80DD
Regardless of the expenditure amount, an individual taking care of a disabled person is allowed to claim the following:
- When the disability level is between 40-80%: Rs. 75,000
- When the disability level is more than 80%: Rs. 125,000
Disabilities Covered –
The following disabilities are covered under this section.
- Mental illness
- Cerebral palsy
- Autism
- Blindness
- Low vision
- Mental retardation
- Locomotor disability
- Leprosy-cured
- Hearing impairment
How is Deduction Under Section 80U Different From 80DD?
An individual who has a disability can also claim a deduction under Section 80U of the income tax act. On the other hand, an individual can claim a deduction under 80DD for expenses incurred for a disabled dependent. However, if the dependent is getting a deduction under this section, no deduction under 80D is allowed.
Deduction Under Section 80DDB
This section provides a deduction for the medical expenses incurred for the treatment of a specific disease. The expenses incurred can be for the assessee or a dependent. The details are as follows:
- The dependent can be a spouse, parents, children, and siblings
- Money spent on the treatment of dependent or the individual
Another crucial point is that to claim a deduction under this section, you need to submit a certificate from a specialist.
Deduction Amount Under 80DDB
The deduction amount will be either Rs. 40,000 or the amount paid, whichever is less. For senior citizens, the amount is Rs. 100,000. However, if the individual is receiving any amount from the insurance company or their employer, that amount shall be deducted from the deduction amount.
List of Specific Diseases
- Neurological diseases with a disability level of 40% or above
- Ataxia
- Dementia
- Dystonia Musculorom Deformons
- Motor Neurons disease
- Aphasia
- Dementia
- Parkinson’s disease
- Chorea
- Hemiballismus
- AIDS
- Malignant cancers
- Hematological disorders
- Chronic renal failure
Things to keep in Mind
It is integral to remember that these deductions are available for the old tax regime. In the new tax regime, all of these deductions are not available. Therefore, check under which tax regime you are paying tax while claiming these deductions.
There you go! Now you know how paying a health insurance policy premium can help you save money while filing an income tax return. In this blog, we have discussed the deductions allowed by the income tax act under sections 80D, 80DD, and 80DDB. And remember, carefully go through your policy details to check whether it allows tax deductions or not.
Disclaimer: The above information is for illustrative purposes only. For more details, please refer to the policy wordings and prospectus before concluding the sales.
