Medical Expenses Deduction Under Income Tax Act (2023 Update)

One of the best investments you can make to cover your medical costs is buying insurance. If you’re worried about paying the meager cost of your health insurance premiums, imagine how you’d be able to pay for your expensive medical bills if you were hospitalized.  Section 80D medical expenses deduction under Income Tax Act provides tax incentives on health insurance premiums to encourage people to add health insurance to their insurance portfolio.

What is section 80D?

Section 80D provides a deduction to an individual or Hindu undivided family (HUF) towards medical insurance premiums and preventive health checkups or contribution to the Central Government on the health of an individual, his family, parents, or members of the HUF.

Who is eligible for Tax Benefits under 80D?

A taxpayer may claim Section 80D medical expenses deduction under income tax act.

Health insurance premiums for the following family members are deductible:

• Self
• Spouse
• Children
• Parents

Hindu Undivided Families (HUF) can also claim deductions under section 80D. 

For HUF, each member’s premium payment is deductible up to the statutory maximum amount.

What documents do I need to claim medical expenses on taxes?

No evidence or documentation is required to claim medical expenses for tax purposes.

Income tax authorities may not require supporting documentation, but your employer may. When issuing Form 16 to file income tax returns, employers should consider any deductions they wish to make for tax-saving purposes. 

So, you must keep a record of your health insurance premium receipts, medical bills, hospital bills, and any other documentation and receipts showing medical expenses incurred in the year you want to claim under Section 80D. 

If you don’t file your taxes using Form 16, keep a record of all medical expenses incurred for the year to help you keep track of all related deductible expenses when you file your tax return.

To clarify, the Income Tax Department does not require proof of 80D medical expenses deduction. 

But, we recommend that you record all expenses incurred for two reasons: showing the deductible on your Form 16 and claiming the deductible.

What medical expenses are tax deductible?

The following expense deductions are permitted by the IRS:

A. Medical Insurance Premium: You and Your Family

The maximum deductible for insurance you and your family members have is Rs. 25,000.

For senior citizens 60 years and over, the deduction is Rs. 50,000.

For 80D, family means your spouse and dependent children.

B. Medical Insurance Premium: For Parents

The maximum deductible amount is Rs. 25,000. If the parents are senior citizens, the deduction is Rs.50,000/-.

Father-in-law and mother-in-law .

C. Expenditure on Preventive Health Check-Ups

It’s like a regular check-up that your doctor or general practitioner conducted once or twice a year.

The cumulative deduction for this examination is up to Rs. 5,000/- for yourself, your family members, and your parents. Cash payments for these expenses are also deductible at 80D.

D. Medical expense deduction for senior citizens (aged 60 & above)

Expenses are deducted if medical insurance is not paid to senior citizens.

There is no definition of medical expenses in the Income Tax Law, but in general, it can be said that medical expenses such as medical expenses, medicine fees, and disability subsidies are included.

The maximum deductible amount is Rs. 50,000/-.

E. Contribution to CGHS/notified scheme

Contribution to the Central Govt Health Scheme (CGHS) or other notified schemes is permissible at Rs. 25,000 for individuals and their families.

Parental contributions are not deductible.

How do I calculate medical tax deductions?

Look at an example to understand this concept.

Assume you are 60 years old and have to pay an Rs.25,000 yearly premium for yourself and your dependents. Besides, you also pay an insurance premium of Rs.32,000 for your parent’s insurance, who is 80 years old. You are eligible for the following benefits under Section 80D:

A tax deduction of Rs.25,000 paid for health insurance premiums for you and your dependents.

If your parents are senior citizens, the tax deduction is Rs.32,000.

The total tax deduction that can be claimed is Rs. 57,000 from the total premium payment of Rs. 57,000.

It is important to note that the maximum deduction that can be claimed is governed by Section 80D of the Income Tax Act of 1961.

What are the exclusions under Section 80D?

The following are exclusions of 80D medical expenses deduction under income tax act:

Payment Method for Premiums: To claim the Section 80D tax credits, only the taxpayer must pay the health insurance premium. If a third party pays the insurance premium, no tax benefits are available. Furthermore, taxpayers are not entitled to tax benefits if premium payments are payable in cash.

Goods and Service Tax: Health insurance premiums paid are subject to an 18% Goods and Services Tax. In addition, no tax benefits are granted on Goods and Services Tax, and CESS fees are charged on insurance premium payments.

Group Health Insurance: Group health plans are not eligible for Section 80D tax benefits. However, if the taxpayer chooses to make additional payments to extend the group’s coverage, they can claim tax benefits for the additional payments.

Frequently Asked Questions (FAQs)

Can seniors deduct medical expenses from taxes?

Section 80D states that senior citizens can claim a maximum deduction of Rs 50,000 for paying premiums for medical insurance.

Can I deduct health insurance premiums?

Taxpayers (individuals/HUF) may claim a Section 80D deduction for health insurance premiums paid in a non-cash mode.

Can I claim Section 80D tax exemption if I have non-cash health insurance through my company?

Yes, but only if your company includes this premium paid on CTC.

Can I avail of tax benefits for more than one health insurance policy?

Yes, you can pay for multiple policies, subject to maximum limits.

Can I claim tax exemptions for my children’s health insurance premiums under Section 80D if they are not financially dependent on me?

 No, if your child is not a dependent, you cannot claim tax benefits for health insurance payments under section 80D income tax act. Your child can claim tax benefits on their gross income.

If my parents are not dependent on me, can I claim my parents’ health insurance premiums for tax purposes?

 Yes, you can claim tax credits for health insurance premiums you paid for your non-dependent parent.

Wrapping Up

Everyone should have health insurance. These plans provide a reliable source of funds in case you suddenly require large sums of money. Therefore, it is important to have the health insurance that best suits you. To help with this, you can contact our trusted financial advisor.

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