Deductions under Section 80D: What is Section 80D of Income Tax Act?

Tax deductions can be availed on individual health insurance or family floater plans. Premiums paid towards health insurance taken for self, spouse, dependent children and/or parents are allowed for deduction. 

As per section 80D, a taxpayer can claim deduction on premiums paid towards medical insurance for self, spouse, parents, and dependent children. Individuals and HUF can claim this deduction. 

The limit of the deduction varies with age. 

A deduction of Rs 25,000 is available for self, spouse, and dependent children. An additional deduction of Rs 25,000 is available for insurance paid for parents aged less than 60 years. 

If any insurer, i.e. self, spouse or parents, is above 60 years of age, then an additional deduction of Rs 50,000 is allowed instead of Rs 25,000. 

Which expenses are not allowed as deductions under Section 80D? 

Health Insurance premium paid in cash.

Payment made on behalf of working children, siblings, grandparents or any other relative.

Group health insurance premium made by a company on behalf of an employee.

How to buy medical insurance? 

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There are many points to be considered while purchasing health insurance. Here are some points to be considered from the standpoint of claiming a deduction under Section 80D and other general clauses before buying any medical insurance: 

Contribution towards health insurance should be made to schemes specified by the Central Government or any other insurer and approved by IRDA, i.e. Insurance Regulatory and Development Authority. 

Please ensure that insurance premium payment is made by any mode other than cash. 

Also, it will be preferable if the policy offers a cashless claim settlement process with sufficient network hospitals covered in your city. 

One should check the list of the network hospitals which have tie-up with your insurer for processing cashless claims. 

Hospital room rent and other expenditures are allowed on a fixed percentage of the sum insured. Hence, choosing a sufficient sum insured is important before purchasing health insurance. 

Please carefully consider the clause relating to pre and post-hospitalisation expenses. Many policies cover all the expenses incurred before 30 days and after 90 days of hospitalisation.

Many insurance providers have started including alternative therapies like Ayurveda, Yoga, Naturopathy, Unani, Siddha and Homeopathy (abbreviated as AYUSH). This can be important to many and should be duly considered. 

Many other expenses get incurred, like lab tests, specialised doctor's visits, etc. Many policies now provide daily cash limits as reimbursement for such additional expenses.

Check the details of the daily cash limit offered, as this help to meet the extra expenses which are not otherwise covered for settlement of the claim. 

Many insurance companies provide yearly health check-ups as added benefits. Health check-ups include various tests and health evaluation, which is essential and helpful in the early diagnosis of any illness. 

Please consider the clause of a no-claim guaranteed bonus every year. Many insurance providers offer a no-claim bonus added to your sum insured for all those years for which the policyholder made no claim. This increases the sum that can be claimed, giving additional security. 

However, it should be noted that all allowed expenditures, like the choice of hospital room, are linked to the original sum assured, excluding the no-claim bonus. 

Post-pandemic, most of the insurance providers are offering COVID coverage. However, details like coverage of COVID, the cap on expenses, daily cash benefits, and miscellaneous charges like PPE kits, if covered or not, should be known before purchasing the insurance.