Deduction in respect of health insurance premia under Section 80D of Income Tax Act, 1961

Deduction under section 80D of the Income Tax Act, 1961 (‘IT Act’) is available in addition to the deduction of Rs. 1.50 Lakhs available collectively under section 80C, section 80CCC and section 80CCD (1) of IT Act. The individual can claim a tax deduction for the health insurance premium paid for self, parents, children, and spouse. Moreover, this section also allows Hindu Undivided Families (HUFs) to claim a deduction.

Section 80D(1) of IT Act provides that

“In computing the total income of an assessee, being an individual or a Hindu Undivided Family, there shall be deducted such sum as specified in sub-section (2) or sub-section (3), payment of which is made by any mode as specified in sub-section (2B), in the previous year out of his income chargeable to tax.”

Pursuant to the above provision –

• Only Individual or HUF can claim this deduction;
• Amount of deduction is specified in sub-section (2) and (3); [Check]
• Mode of payment of health insurance premium is provided in sub-section (2B); [Check]
• Payment of health insurance premium should be made in previous year [for Financial Year 2019-2020, 31.03.2020 has been extended to 30.06.2020]

Every individual or HUF can claim a deduction under Section 80D for their medical insurance which is taken from their total income in any given year. Not only can individual take benefit by purchasing a health plan for himself but also he can take advantage of buying the policy to cover his spouse, or his dependent children or parent.

Mode of payment of health insurance premium

Pursuant to sub-section (2B) of IT Act  –

“For the purpose of deduction under sub-section (1), payment shall be made by-

• Any mode, including cash, in respect of any sum paid on account of preventive health check-up;
• Any mode other than cash in all other cases not falling under clause (i).”

Please note that payment should be made by any mode other than cash except in case of Preventive health check-up i.e. only Preventive health check-up payment can be made in cash.

Quantum of Deduction available under Section 80D

The quantum of deduction which is available under Section 80D of the IT Act has been provided under sub-section (2) and (3) of the IT Act. Please note that sub-section (2) is applicable in case of where the assessee is an individual and sub-section (3) is applicable in case of where the assessee is a HUF. It means the quantum of deduction available under Section 80D for individual is mentioned in sub-section (2) and for HUF in sub-section (3). Moreover, sub-section (4) provides quantum of deduction available in case of any member of the family is senior citizen for whom amount of health insurance premium is paid.

Deduction available to Individual under Section 80D(2) of IT Act.

First, we look the provision of Section 80D(2) of the IT Act as under-

“Where the assessee is an individual, the sum referred to in sub-section (1) shall be the aggregate of the following, namely: –

• The whole of the amount paid to effect or to keep in force an insurance on the health of the assessee or his family or any contribution made to the Central Government Health Scheme or such other scheme as may be notified by the Central Government in this behalf or any payment made on account of preventive health check-up of the assessee or his family as does not exceed in the aggregate twenty five thousand; and
• The whole of the amount paid to effect or to keep in force an insurance on the health of the parent or parents of the assessee or any payment made on account of preventive health check-up of the parent or parents of the assessee as does not exceed in the aggregate twenty-five thousand rupees;
• The whole of the amount paid on account of medical expenditure incurred on the health of the assessee or any member of his family as does not exceed in the aggregate fifty thousand rupees; and
• The whole of the amount paid on account of medical expenditure incurred on the health of any parent of the assessee, as does not exceed in the aggregate fifty thousand rupees.

Provided that the amount referred to in clause (c) or clause (d) is paid in respect of a senior citizen and no amount has been paid in to effect or to keep in force an insurance on the health of such person.

Provided further that the aggregate of the sum specified under clause (a) and clause (c) or the aggregate of the sum specified under clause (b) and clause (d) shall not exceed fifty thousand rupees.

Explanation- for the purposes of clause (a), “family” means the spouse and dependent children of the assessee.”

By the analysis of the above provision, deduction under section 80D of the IT Act is available basically for two types of payment, namely –

1. Medical insurance premium (including preventive health check-up); and

2. Medical expenditure.

The individual can get the benefit of deduction of under Section 80D of the IT Act as under-

1. Deduction in respect of Medical insurance premium (including preventive health check-up)

2. Medical Insurance premium for Assessee or his family [Clause (a) of sub-section (2) of Section 80D]-

Amount paid towards medical insurance premium or amount paid for preventive health check-up of the assessee or his family (here family means spouse and dependent children) up to a maximum amount of Rs. 25,000.

It should be noted here that in case of prevent health check-up maximum amount of Rs. 5,000 is allowed as a deduction [sub-section 2A], however, the same is included in the overall maximum deduction of Rs. 25,000.

A deduction to the extent of Rs. 25,000 is allowed in respect of the following payments-

• premium paid to effect or keep in force an insurance on the health of self, spouse and dependent children or
• any contribution made to the Central Government Health Scheme or
• such other health scheme as may be notified by the Central Government. Contributory Health Service Scheme of the Department of Atomic Energy has been notified by the Central Government.

Moreover, in case of any person of above mentioned [i.e. self, spouse and dependent children] is of the age of 60 years or more and resident in India, the such quantum of deduction of Rs. 25,000 shall be read as Rs. 50,000. [please see sub-section (4) further mentioned]

1. Medical Insurance premium for Parents of Assessee [Clause (b) of sub-section (2) of Section 80D]-

Amount paid towards medical insurance premium or amount paid for preventive health check-up of the parents of assessee up to a maximum amount of Rs. 25,000.

It should be noted here that in case of prevent health check-up maximum amount of Rs. 5,000 is allowed as a deduction [sub-section 2A], however, the same is included in the overall maximum deduction of Rs. 25,000.

Moreover, in case of either or both the parents is of the age of 60 years or more and resident in India, the such quantum of deduction of Rs. 25,000 shall be read as Rs. 50,000. [please see sub-section (4) further mentioned]

It is noted that Section 80D(2) of the IT Act provides a deduction to the extent of ₹25,000 in respect of the premium paid towards an insurance on the health of self, spouse and dependent children. The section further allows a deduction for upto ₹25,000 for premium paid towards a health insurance policy of parents of the assessee. It does not matter whether parents are dependent or not.

2. Deduction in respect of Medical Expenditure

It is generally seen that senior citizens are not covered under health insurance policy. As a welfare measure towards senior citizens i.e. person of the age of 60 years or more and resident in India, who are unable to get health insurance coverage, deduction of upto Rs. 50,000 would be allowed in respect of any payment made on account of medical expenditure in respect of a such person(s), if no payment has been made to keep in force an insurance of the health of such person(s). These senior citizens are covered under clause (c) [i.e. self, spouse and dependent children] and (d) [i.e. parent of assessee] of sub-section (2) of Section 80D.

It means any payment made on account of medical expenditure in respect of self, spouse and dependent children and parents, who is senior citizen i.e. person of the age of 60 years or more and resident in India, shall be eligible for deduction under Section 80D(2)(c) & (d). However, it is to be noted that there should no payment to keep in force an insurance of the health of such person(s).

The above provisions in tabular format for better understanding are as under –

Sr. No.	Persons covered	Type of payment	Maximum deductible amount	Subject to or	Double deduction i.e. Rs. 50,000
(a)	Assessee or spouse or dependent children	Medical insurance premium + Preventive Health Check-up (PHC)	Rs. 25,000	Maximum PHC up to Rs. 5,000	If any of such person is senior citizen.
(b)	Parents of the assessee	Medical insurance premium + Preventive Health Check-up (PHC)	Rs. 25,000	Maximum PHC up to Rs. 5,000	If one or both parents are senior citizen
(c)	Assessee or spouse or dependent children	Medical Expenditure	Rs. 50,000	If any of such person is senior citizen and no payment to keep in force an insurance of the health of such person.	–
(d)	Parents of the assessee	Medical Expenditure	Rs. 50,000	If any of such person is senior citizen and no payment to keep in force an insurance of the health of such person.	–
	The total of all four clause is Rs. 1,50,000. Whether an assessee can claim the deduction under section 80D of Rs. 1,50,000/- according to fulfil the criteria of each clause? No- please note that second proviso of sub-section (2) clearly mention that ‘the aggregate of the sum specified under clause (a) and clause (c) or the aggregate of the sum specified under clause (b) and clause (d) shall not exceed fifty thousand rupees.’ Accordingly, the assessee can claim the deduction upto maximum as under- 1. Medical insurance premium, PHC and Medical Expenditure on Assessee or spouse or dependent children- Maximum Rs. 50,000/-. 2. Medical insurance premium, PHC and Medical Expenditure on Parent of Assessee – Maximum Rs. 50,000/-. Therefore, an assessee can claim maximum deduction upto Rs. 1 lakh in any situation of all four clauses.

The limits to claim tax deduction under Section 80D of the IT Act depends on who all are included under the health insurance cover. Hence, depending on the taxpayer’s family situation the limit could be Rs. 25,000/-, Rs. 50,000/-, Rs. 75,000/- or Rs 1 lakh.

Deduction available to HUF under Section 80D(3) of IT Act.

Pursuant to Section 80D(3) of the IT Act-

“Where the assessee is a Hindu undivided family, the sum referred to in sub-section (1), shall be the aggregate of the following, namely:-

• Whole of the amount paid to effect or to keep in force an insurance on the health of any member of that Hindu undivided family as does not exceed in the aggregate twenty-five thousand rupees; and
• The whole of the amount paid on account of medical expenditure incurred on the health of any member of the Hindu undivided family as does not exceed in the aggregate fifty thousand rupees;

Provided that the amount referred to in clause (b) is paid in respect of a senior citizen and no amount has been paid to effect or to keep in force an insurance on the health of such person.

Provided further that the aggregate of the sum specified under clause (a) and clause (b) shall not exceed fifty thousand rupees.”

By the above, deduction under section 80D is allowable in respect of premium paid to insure the health of any member of the family. The maximum deduction available to a HUF would be Rs. 25,000. However, in case of any person of HUF family is of the age of 60 years or more and resident in India, the such quantum of deduction of Rs. 25,000 shall be read as Rs. 50,000. [please see sub-section (4) further mentioned]

Please note that the amount paid on account of medical expenditure incurred on health of any member(s) of a family who is a senior citizen i.e. is of the age of 60 years or more and resident in India, would qualify for deduction subject to a maximum of Rs. 50,000 provided no amount has been paid to effect or keep in force any insurance on the health of such person(s).

Treatment of deduction under section 80D in case of Senior Citizen –

The treatment of available deduction under section 80D is different in case of a senior citizen. It should be noted here that ‘senior citizen’ here means an individual resident in India who is of the age of 60 years or more at any time during the relevant previous year.

Pursuant to sub-section (4) of IT Act –

“Where the sum specified in clause (a) or clause (b) of sub-section (2) or clause (a) of sub-section (3) is paid to effect or keep in force an insurance on the health of any person specified therein, and who is a senior citizen, the provisions of this section shall have effect as if for the words “twenty five thousand rupees”, the words “fifty thousand rupees” had been substituted.

Explanation- for the purposes of this sub-section, “senior citizen” means an individual resident in India who is the age of sixty years or more at any time during the relevant previous year.”

*****

Disclaimer: Nothing contained in this document is to be construed as a legal opinion or view of either of the authors whatsoever and the content is to be used strictly for educative purposes only.