Section 80D of the Income Tax Act, 1961 provides for income tax deductions on medical expenditures. The claim of medical expenditure under 80D can be made on the medical bills of self or dependent persons such as a spouse, children, parents, or other family members. Payments made for premiums of health insurance policies qualify for tax deductions under 80D. Thus, this section gives people an extra incentive to purchase health insurance policies. Money spent for the medical treatment of parents and other family members can also be claimed for deductions.
There are certain aspects to keep in mind about making a claim of medical expenditure under 80D. Some of them have been discussed here.
What Does Medical Expense Include Under 80D?
The common question asked by people is what is covered under medical expenditure? The answer can be gleaned by a simple reading of the Income Tax Act. Specific diseases necessitating medical expenses defined in the IT act are covered, and expenditures incurred for treating diseases not mentioned under the act are not eligible for deductions. Deductions up to a certain limit are also provided for preventive health check-ups of self, spouse, children, parents, or other dependents.
Apart from section 80D, another section known as 80DDB provides income tax deductions on medical expenses for treatment of certain diseases and medical conditions for a specific age group as mentioned in the Act. Thus, in addition to making a claim of medical expenditure under 80D, you can also claim exemptions under 80DDB if you have spent money for the treatment of any disease mentioned in the Act.
Section 80DD and 80U should also be understood to have a clear idea about what is covered under medical expenditure. Section 80DD provides IT deductions for the expenses incurred for the treatment or rehabilitation of a dependent person who has a disability. 80U, on the other hand, provides IT deductions if the assess themself is disabled.
What Is the Limit to Claim Medical Expenditure Under 80D?
An important question is what is the limit to claim medical expenditure under 80D. Deductions are made from the person’s income for medical expenditure on self, spouse, children, parents, or other dependents. The lower limit of making a claim of medical expenditure under 80D is Rs. 25,000 in a financial year, while the higher limit is Rs. 50,000 in a financial year.
Thus, Rs. 25,000-50,000 is the answer to the question of what is the limit to claim medical expenditure. Age plays a main factor in this case. The limit to claim medical expenditure is Rs. 25,000 if the person is aged below 60 years, while the limit increases to Rs. 50,000 if the person is aged 60 years or above.
What Are the Deductions Under Section 80D?
Any claim of medical expenditure under 80D is subject to certain conditions governing maximum deduction allowed. Multiple scenarios determine the maximum deductions. Check the category under which you fall before making a claim of medical expenditure under 80D.
Suppose the claim of medical expenditure under 80D is made on premium paid for health insurance by the policyholder for self, spouse, and children who all come under the non-senior citizen category. In that case, the maximum deduction allowed is Rs. 25,000.
If the claim of medical expenditure under 80D is made on premium paid for self, spouse, children, and non-senior citizen parents, an additional deduction of Rs. 25,000 is allowed for the parents, so the maximum deduction increases to Rs. 50,000.
If the policyholder makes a claim of medical expenditure under 80D for a premium paid for self, spouse, children, and senior citizen parents, an additional deduction of Rs. 50,000 is allowed for senior citizen parents. Thus, the maximum deduction rises to Rs. 75,000.
Suppose a senior citizen taxpayer makes a claim of medical expenditure under 80D for a premium paid for self, spouse, dependent children, and senior citizen parents. In that case, the taxpayer will get a deduction of Rs. 50,000 on account of being a senior citizen. Senior citizen parents would also get a deduction of Rs. 50,000. Thus, the total deduction amounts to Rs. 100,000.
As discussed before, there are certain other provisions apart from 80D which provide deductions under certain conditions. The maximum deductions allowed to taxpayers by 80DDB for treatment of specific diseases are up to Rs. 60,000 for senior citizens and up to Rs. 80,000 for super senior citizens.
Section 80DD allows deductions from the taxpayer’s income for medical expenditures incurred to treat the taxpayer’s disabled dependents. A dependent can be a spouse, parents, or siblings. The maximum allowed deduction is Rs. 75,000. If the dependent is 80% or more disabled, then the deduction can rise to Rs. 1.25 lakh.
Section 80U is applicable if the taxpayer is themself disabled. The maximum deduction can be Rs. 75,000-1.25 lakh.
What Is an Eligible Mode of Payment to Avail Deductions Under 80D?
The common question asked by people is what is an eligible mode of payment to avail deductions under 80D and other provisions. First, it needs to be kept in mind that cash payment of health insurance premiums or medical expenditures is not eligible for deductions.
A claim of medical expenditure under 80D or other sections can be made only if the premium or medical bill has been paid through cheque/draft, net banking, credit card, debit card, UPI, wallet, or any other digital method.
Thus, the answer to the question: what is an eligible mode of payment to get tax deductions on medical expenses is any mode other than cash payment. However, premiums for preventive health check-ups can be paid in cash, and the limit is Rs. 5000.
What Are the Exclusions Under Section 80D?
A taxpayer wanting to make a claim of medical expenditure under 80D should be aware of the exclusions under section 80D.
There are 3 exclusions under section 80D, which are as follows.
- The taxpayer cannot make a claim of medical expenditure under 80D if they have paid the health insurance policy premium on behalf of working children, grandparents, siblings, or other relatives.
- Cash payment of the health insurance premium disqualifies the taxpayer from making a claim of medical expenditure under 80D.
- An employee of any company cannot claim of medical expenditure under 80D on their group health insurance premium paid by the employer.
Documentary evidence Income Tax Act does not specify any documentary proof required for section 80D tax benefits. But some supporting documents are needed to make a claim of medical expenditure under 80D. The documents can be a medical bill, invoice, diagnostic test reports, premium payment receipts, doctor’s prescriptions, etc. These documents act as the proof required for 80D to claim deduction successfully.