Deduction under Section 80D

Any investor's primary goal when submitting a tax return is to minimise their tax obligation. A tax deduction of up to Rs. 1,00,000 may be taken advantage of using Section 80D of the Income Tax Act. Aside from this, investors have several other options to make investments while saving money on taxes.

An example of this is having health insurance. The investor will benefit from this not just in the event of a medical emergency. Still, it will also enable them to significantly reduce their tax liability via tax deductions from their gross annual income.

To get the most tax savings, let's learn the many aspects of this part.

Medical insurance must be sufficient if your insurance portfolio is considered comprehensive. If paying your insurance premium is too expensive for you, you'll need to figure out how to pay for your medical care should you end up in the hospital. Anyone may find this to be a significant hassle. The government also urges you to get medical insurance. Deductions under Section 80D of the Income Tax Act depend on the cost of your health insurance premiums.

Every person or Hindu Undivided Family may claim a tax deduction under Section 80D for the medical insurance they have chosen, subtracted annually from their total income. This article will concentrate on the Section 80D deductions for the financial year 2021–22 (AY 2022–23).

According to section 80D, buying health insurance for your spouse, dependent children, or parents offers identical tax advantages as buying insurance for yourself. The deductions provided by Section 80D go above and above those that you may be able to claim under other sections, such as Section 80C, Section 80CCC, and Section 80CCD.

Only taxpayers in the Individual or HUF category are eligible for tax deductions for medical insurance premiums and senior citizen medical expenditures.

• Individual or HUF taxpayers may purchase insurance for:
• Self
• Spouse
• Dependent children
• Parents

This deduction is not allowable for any other organisation. A business or firm, for instance, cannot make a deduction under this clause.

Limitations on section 80D deductions for individuals:

A deduction of up to Rs. 25,000 is permitted for the following:

• Payment made to maintain health insurance coverage for oneself, one's spouse or dependent children.
• Any payment made to the government's central health programmes.
• The central government may declare any other programme eligible for a deduction.

In addition to those above, a further deduction for the parents' insurance is allowed, up to a maximum of Rs. 25,000 for those under 60 and Rs. 50,000 for those over 60. If the individual and the parent are both over 60, the maximum deduction allowed by this provision is Rs. 1,000,000.

Seniors also include residents who were at least 80 years old at some point in the preceding year and are covered by senior citizens. Parents also include the father and mother (dependent or not), but not the father- and mother-in-law.

You must give the policy documents, and the payment slips for the premium to your employer if you are a salaried person and wish to take advantage of the 80D tax deduction. Your health insurance section 80D income tax return will be available to you. Businesses may submit online tax returns.

A financial year is granted a deduction of Rs 25,000 under Section 80D. The maximum deduction allowed for senior citizens is Rs 50,000.

1. Individual:

• A person may deduct up to Rs 25,000 for their insurance and their spouse’s and dependent children's insurance.
• If your parents are older than 60, you may be eligible for an additional/separate deduction of up to Rs. 50,000. If your parents are younger than 60, you may be eligible for an additional/separate deduction of up to Rs.
• If you incur medical costs for seniors (yourself, your spouse, your dependent children, or your parents) that are not covered by health insurance, you may be eligible for a deduction up to the amount above Rs 50,000.
• The maximum deduction available under this clause is Rs 1,000,000 if the taxpayer and the taxpayer's parents are older than 60 years old and have medical insurance. You may deduct the costs associated with treating senior citizens (taxpayer/family and parents) if they are not covered by health insurance up to the allotted amount.
• Senior citizens above 60 include elderly and extremely senior citizens.

2. HUF

• Any medical claim made for one of the HUF's members may be deducted under Section 80D.
• If the covered member is under 60 years old, the deduction will be Rs 25,000; if the insured person is 60 years or more, the deduction will be Rs 50,000.

Before buying health insurance, several variables need to be taken into account. Before purchasing any medical insurance, the following issues should be taken into account about claiming deductions under Section 80D and other general clauses:

• Contributions for health insurance should go toward programmes authorised by IRDA and defined by the Central Government or any other insurer, i.e., Regulatory and Development Authority for Insurance.

• Please make sure you pay your insurance premiums in a method other than cash. Additionally, if the insurance provides a cashless claim settlement procedure and enough network hospitals in your location are insured, it will be pretty handy. One should review the network hospitals with agreements with your insurance company to file cashless claims.

• Rent for hospital rooms and several other expenses are covered up to a certain proportion of the insured amount. Therefore, selecting a sufficient insured sum is crucial before purchasing health insurance.

• Please carefully read the paragraph referring to before and post-hospitalization expenditures. Many insurance plans pay for all costs spent up to 30 days before and up to 90 days following hospitalisation.

• Alternative treatments, including Ayurveda, Yoga, Naturopathy, Unani, Siddha, and Homoeopathy, are now being covered by many insurance companies (abbreviated as AYUSH). Many people may find this essential. Therefore, it deserves careful consideration.

• Additional costs include lab testing, specialised medical visits, etc. Nowadays, much insurance includes daily monetary limitations as compensation for these extra costs. Examine the specifics of the daily cash cap provided since this enables you to pay any additional costs for settling the claim that is not otherwise covered.

• Annual health examinations are offered as an extra benefit by many insurance carriers. The different tests and evaluations included in health check-ups are crucial for the early detection of any ailment.

• Please take into account the no-claim guaranteed bonus clause each year. Numerous insurance companies give a no-claim bonus that is applied to your total coverage for all the years the policyholder did not file a claim. This provides more security by increasing the amount that may be claimed. It should be noted that, except for the no-claim incentive, all allowable expenses, such as the choice of hospital room, are tied to the initial amount insured.

• Most insurance companies are now providing COVID coverage after the outbreak. Before buying the insurance, you should know the specifics, such as COVID coverage, the spending limit, daily cash benefits, and whether or not other costs, such as PPE kits, are covered.

When a taxpayer or family member is hospitalised due to a medical emergency, health insurance coverage shields them from financial loss. The insurance covers the expense of the medical care and ensures the client receives the finest care possible. The following is a list of the advantages of health insurance:

1. Payment-Free Hospitalisation
An individual may get cashless treatment with health insurance coverage at several multi-speciality hospitals around the country. The insurance company's network hospitals have been granted empanelled status.

2. Emergency Room Fees
A health insurance policy will pay the ambulance costs if the assessee experiences an unlucky circumstance like a medical emergency. These policies typically pay the entire cost of the ambulance or a portion of it.

3. Home Office Expenses
In addition to the treatment, the assessee could sometimes be requested to get home health care, including physiotherapy. By the terms of the policy, the health insurance coverage also covers the expense of receiving treatments at home.

4. Conditional Disease
Certain pre-existing diseases are also covered by health insurance. Additionally, it indicates that the insurance also pays for costs related to the treatment of a condition that already existed at the time of purchase. If the assessee has pre-existing conditions, there may be two to four years of waiting.

5. Before and after hospitalisation
A person may incur additional costs when they encounter a medical emergency in addition to hospital and ambulance fees. All of these costs are covered by health insurance. It pays for pre- and post-hospitalisation charges for a specific time. The policy language makes this period quite clear.

In the Income Tax Act, Section 80D lists the following exclusions:

• Premium Payment Method: Only the taxpayer should pay health insurance premiums to qualify for section 80D tax advantages. The taxpayer will not be qualified for a deduction under Section 80D if a third party is responsible for paying the premium. Moreover, taxpayers will not be qualified for tax advantages if the premium payments are made in cash.

• Service Tax: Taxpayers are not entitled to any tax advantages regarding the service tax and cess charges assessed on the payment of the premium. Service tax is levied on health insurance premiums for the unemployed, and the amount owed is equal to 14% of the premium.

• Group Health Insurance: According to Section 80D of the Income Tax Act, group health insurance plans are not eligible for tax advantages. Taxpayers may, however, opt to increase their group coverage by paying an additional premium amount, in which case they may deduct that additional amount under Section 80D.

It's common to use the terms "health insurance" and "medical insurance" interchangeably. But there are some fundamental distinctions between the two. Only selected ailments and amounts are covered for hospitalisation under Mediclaim insurance.

Hospitalisation is required to make a medical claim. On the other side, health insurance may pay extra costs, including preventative medical exams, ambulance, and pre-hospitalisation.

Before we delve into the advantages of Section 80D deduction, let us have a look at some of the benefits of a good health insurance policy-

a. A hospital accepting just credit cards
Health insurance provides additional advantages and other crucial elements like coverage of severe illnesses and other disorders. Most health insurance plans provide you with the convenience of cashless hospitalisation.
Any disease or injury that your health insurance covers may be treated at one of the hospitals on the insurance company's list of network hospitals. It is simple to use this service after following the appropriate steps.

b. The cost of the ambulance
Another crucial component of a health insurance plan is ambulance fees.

c. Unrelated costs
Insurance also pays for expenses made before or after hospitalisation and hospital fees. These expenses will be considered a liability in health insurance coverage. Insurance firms assist their insured by covering their pre- and post-hospitalization costs.

The taxpayer must consider a few things when claiming a deduction under section 80D. These recommendations are provided below.

• To qualify for a deduction under this section, the cost of preventative health checks may be paid in cash. But any other payment, such as the insurance premium, had to be paid using a method other than cash.

• Only contributions paid to a health insurance plan authorised by IRDAI and stipulated by the Central Government are eligible for a tax deduction.
• The cost of health insurance for any additional family members is not deductible under this clause.

• The premium will not be eligible for a deduction if paid on behalf of working children.

• The taxpayer's premium for any group health insurance offered by their work is not deductible under this provision if they already have it.

• The deduction may be claimed in proportion to the premium paid if the taxpayer and their parents jointly pay it.

Before you purchase a health insurance policy, keep the following in mind about section 80D:

• Your health insurance policy must be a part of a programme that complies with regulations set out by the federal government or acknowledged by the Insurance Regulatory and Development Authority to be eligible for the section 80D deduction.

• Any means other than cash may be used to make payments. Cash payments are not eligible for a tax deduction.

• Any Indian citizen 60 years of age or older during the financial year you want to receive benefits is referred to as a senior citizen. Article 80D

• Any premiums paid for insurance that benefits a sibling, grandparent, aunt, uncle, or other relative cannot be claimed as tax-deductible.

• According to section 80D, if you and a parent contribute a portion toward medical insurance, you qualify for a tax deduction. Depending on how much each of you has paid will determine this.

• By section 80D, you are not permitted to claim the premium’s service tax or cess component.

• The cost of group health insurance a corporation gives is not deductible.

• Medical insurance premiums paid directly and by one's employer are eligible for tax deductions under section 80D.

• Family and individual health insurance are also eligible for Section 80D tax deductions.

• You may get tax advantages under Section 80D for jobless kids. If a male kid is jobless, he may be insured until age 25. Tax advantages are available to a female child who is jobless up to her marriage. No tax deductible is available for premiums paid on behalf of working children.

• Instead of both couples covering the whole family, you or your spouse should get health insurance for their parents if you want to maximise the tax advantage.

• Spouses can claim tax deductions for health insurance bought just for their parents and not their in-laws under Section 80D.

• It doesn't matter whether you are your parent’s primary source of income. Regardless of that, 80D tax deductions are still possible.

A long-term investment with excellent long-term returns, health insurance ensures you have the money you need to cover your medical expenses in the case of an emergency. Customers of health insurance plans must continue to pay a recurring payment to maintain their coverage.

Additionally required for coverage, this premium adds up to a sizeable cost for policyholders. Tax deductions under Section 80D are intended to lessen the financial burden of these premium payments and to enable you to boost your net return on investment. With a maximum tax-deductible amount of 1 lakh rupees per person, you may save tax under section 80D up to 25,000 rupees per month per health insurance policy.