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Sunday, April 12, 2015

Understand Health care provisions (Section 80D) for you post Budget 2018

[Last Update : 09-March-2018]
Section 80D of the Income Tax Act provides provisions for us to claim deductions in taxable income for the health insurance policies, medical expenses and preventive medical checkups that we do throughout the year. Make sure you are aware of the latest provisions as per Budget 2018, so that you can save on taxes for the money you pay on covering your health.

With Budget 2018, there has been a long awaited change in the Health Insurance related deductions that can be claimed to save taxes. These changes were long overdue, and indicate the increasing costs towards medical expenses and health insurance.

Here are the list of new deductions allowed as per Budget 2018:


The deductions that can be claimed under Section 80D are as follows. 

Case 1 : No one in the family has attained the age of 60 years
Self, Spouse and Dependent Children : Rs.25,000/- (Budget 2015 : Same; Prior to 2015 : Rs.15,000/-)
Parents : Rs. 25,000/- (Budget 2015 : Same; Prior to 2015 : Rs.15,000/-)
Total : Rs. 50,000/-

Case 2 : Assessee and family is less than 60 years but parents are above the age of 60 years
Self, Spouse and Dependent Children : Rs.25,000/- (Budget 2015 : Same; Prior to 2015 : Rs.15,000/-)
Parents : Rs. 50,000/- (Budget 2015 : Rs.30,000/- ; Prior to 2015 : Rs.20,000/-)
Total : Rs. 75,000/-

Case 3 : Assessee as well as parents are above the age of 60 years
Self, Spouse and Dependent Children : Rs.50,000/- (Budget 2015 : Rs.30,000/- ; Prior to 2015 : Rs.20,000/-)
Parents : Rs.50,000/- (Budget 2015 : Rs.30,000/- ; Prior to 2015 : Rs.20,000/-)
Total : Rs.1,00,000/-

Assessee is 40 years and parents are 65 years. Assessee has paid Rs. 23,000 as his family's health insurance premium and also Rs. 48,000 as his parent's insurance premium. In this case, Assessee would be allowed a deduction of Rs. 23,000 for himself and Rs. 48,000 for his parents. So, the total deduction that can be claimed on health insurance premium under Section 80D by the assessee would be Rs. 71,000/-. 

General Guidelines for above Deductions:
We must understand the following general guidelines regarding the taxation rules of Section 80D:
1/ The Budget 2018 amendments will take effect, from 1st April, 2019 and will, accordingly, apply in relation to the assessment year 2019-20 (Financial Year 2018-19) and subsequent assessment years.
2/ Section 80D deduction benefits are not available to group health insurance premiums paid by your employers.
3/ The benefit is available if payment is made in any manner except in cash. You can pay using any online mode like internet banking, credit or debit cards, or can even pay by a cheque.
4/ The benefits proposed in section 80D are in addition to those proposed under section 80C, which can be availed up to a maximum of Rs1.5 lakh.

Single Premium Benefit
With Budget 2018, any assessee (in any age group) can claim the Single Premium Benefit. Let us see how this benefit works for you.  Under this benefit, you can get the claim proportionately in multiple years for single premium policies. 
For instance, if your health insurance premium for a sum assured for a family of four (husband, wife and two children) in one year is Rs.20,000, you can claim this amount as a deduction under section 80D. However, insurance companies provide a discount if you take the policy for a period of 2 years, and your premium will be less than Rs.40,000 in that case.
Assuming that you get a 5% discount, you would pay Rs.38,000 for the 2-year cover. Under the current rules, you are only allowed to claim a deduction in the first year that too up to Rs.25,000 only. This was a big dampener to go for multi year health insurance by paying a single premium.
As per proposals in the 2018 Budget, you would be able to claim the total premium paid, proportionately, over the 2-year period, which would mean a deduction of Rs.19,000 in both the years.

Preventive Health Checkup
Under Section 80D, a maximum deduction of Rs. 5,000 is allowed on any preventive health checkups during the year. This is in addition to the deductions allowed for health insurance premiums.

For Very Senior Citizens
For very senior citizen above the age of 80 years who are not eligible to take health insurance, deduction is allowed for Rs 30,000 toward medical expenditure.

SECTION 80DDB - For Specified Diseases
Deduction towards medical treatment for senior citizens suffering from specified diseases raised from Rs 60,000 to Rs 80,000.  The deduction is for the medical treatment of specified critical ailments of certain chronic and protracted diseases such as cancer, thalassaemia and others.

SECTION 80DD - For Differently Abled
In order to provide tax benefit to those who are differently abled or those caring for dependents who may be differently abled, Under Section 80DD and Under Section 80U – where disability is 40% or more but less than 80% the fixed deduction. The deduction earlier allowed was Rs 50,000 which is now raised to Rs 75,000. And in case of more than 80% disability deduction allowed was Rs 1,00,000 which is now raised to Rs 1,25,000.

Make sure you make use of the revised limits and save on the tax related to your health. Remember that a rupee saved is five rupees earned.

Revision History:
Mar 2018 : Updated for Budget 2018 Provisions
Apr 2015 : Original Post


Manoj Arora

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