Section 80D intricately defines the eligibility criteria for the health care expenses that are considered under the purview of the Income Tax Act. Since health care costs may differ from person to person, section 80D has different tax deductions on the basis of different health care costs. The eligibility of the health care costs is as follows:
1. In the case of health insurance premium– An individual having a health insurance policy can get a maximum tax deduction of Rs 25,000. Health insurance leads to an extended tax benefit as if an individual buys health insurance policies for parents; the maximum tax deduction available is Rs 25,000 if the parents are below 60 years of age. If the parent is above the age of 60 (senior citizen) the individual can avail up to Rs 30000 as a tax benefit. In rare cases where the policyholder and parents are above the age of 60, then the total tax benefit is Rs 60,000.
2. In the case of critical diseases- Under the Section 80DDB, medical expenses incurred on the treatment of critical ailments get tax benefits up to Rs 40,000. However, this amount may vary as per the age of the policyholder. For senior citizens (between 60 years and 80 years), the tax limit is Rs 60,000 and for super senior citizens (above 80 years), the limit is Rs 80,000. The section has set down the diseases and cases that are considered for a tax deduction. The diseases are as follows: neurological disease, (Dementia, dystonia musculorum, deformans, motor neuron disease, ataxia, chorea, hemiballismus, aphasia, Parkinson’s disease), Malignant cancer, full blown AIDS, Chronic renal failure, and hematological disorders- hemophilia and thalassemia. However, to get the tax deduction, one needs to submit a medical certificate obtained from a specialist doctor.
3. In the case of a disabled dependent people- Under Section 80DD, medical expenses incurred on the treatment of a differently-abled person with 40% or more disability can claim a tax deduction up to Rs 75,000. This amount reaches to Rs 1.25 lakhs in case of over 80% disability. In order to claim the deduction, you need to submit a medical certificate obtained from a specialist doctor along with a 10-IA form. Some of the disabilities which are eligible for tax benefits are; severe blindness (low vision), leprosy, mental retardation, hearing impairment, autism, locomotor disability, mental illness, cerebral palsy, and much more.
4. In the case of persons with disability- Under Section 80U, a person with over 40% and 80% disability, can claim a tax deduction up to Rs 75,000 and Rs 1.25 lakhs, respectively. However, to get the deduction, an individual is required to submit an authenticated certificate obtained from a specialist doctor. The Section 80U considers the same list of disabilities as that of Section 80DD. There is a fine line difference between section 80DD and section 80U. The Section 80DD primarily focuses on the dependent people and thus provides with an extended tax benefit from health care expenses. Whereas, Section 80U primarily involves an individual, where an individual who is suffering from some disabilities can avail tax benefit and deduction from the annual taxable income.
5. In the case of health checkups: Preventive health checkups get tax benefits up to Rs 5,000 within the total tax limit of Rs 25,000 and Rs 30,000. It means, if your medical insurance premium is Rs 20,000 and you undergo a preventive health check-up for which you pay Rs 5,000, you will get total Rs 25,000 as a tax deduction. However, if your insurance premium is Rs 20,000 but your preventive health checkup expense is Rs 10,000, you will get the total of Rs 25,000 as a tax deduction. Note, the tax benefit is available in case of preventive health checkups only and not on checkups done during the medical treatment.
6. In the case of insurance premium payment via cash: Though insurers allow you to pay premiums in cash, you won’t get any tax benefits on premiums paid through cash. It means, to get tax benefits, you should pay your premium via internet banking, credit/debit card or any mode other than cash.
These are some of the major health care expenses which are eligible for tax deductions. Remember, as medical costs are increasing at an unprecedented rate, health insurance is a necessity. Therefore, restrain yourself from buying the policy for tax benefits only.