How much tax benefit can be claimed u/s 80D of the Income Tax Act, 1961

Medical emergencies often lead people in shock. It is always advised to be pro-active by adopting preventive measures, as it is correctly said that Prevention is better than Cure.
Therefore in the last few years Health Insurance Policies has become very famous. To encourage more investment in this area the Government is giving tax benefit to the Individuals or HUF (Hindu Undivided Family) paying the expense of Health Insurance Premium.
 

Provisions of Section 80D
1. As per Section 80D of the Income Tax Act, 1961 an individual or HUF can claim a deduction upto Rs.25000 for the insurance of Self, Spouse and Dependent Children.
2. An addition deduction for the insurance of the parents is available to the extent of Rs.25000/-.
3. If the parents or the taxpayer (or family) for whom the deduction has been claimed are 60 years or more then the above both limits of Rs.25000 shall increase to Rs.50000/- for parents as well as the taxpayer.
4. Therefore we can say that the maximum deduction that can be claimed under this section is Rs. 1,00,000/-
5. An important point to be noted is that any payments made towards Preventive-Health Checkups will entitle the taxpayer a deduction upto Rs.5000/- which is included within the above mentioned Overall Limit.
6. Budget 2018 has introduced a new concept regarding Single Premium Health Insurance Policies. Under this provision where a taxpayer has made a lumpsum premium payment in a single year for a policy valid for more than one year then he can claim a deduction equal to the appropriate fraction of the amount. The appropriate fraction shall be arrived by dividing the lump sum amount paid by the no. of years of the policy which is again subject to the limits of Rs.25000/ Rs.50000 as the case may be.
7. A component of the GST (Goods and Services Tax) which has been paid on the insurance premium as an element of the premium can also be claimed as the tax benefit.
8. Nowadays it is contractually provided in the policy document/renewal intimations that GST would be recovered in addition to the premium. As without the payment of GST, the obligation of the policyholder would not be discharged. Therefore according to the language of the section 80D “Any sum paid” shall be eligible for the deduction purposes.
9. To claim the benefit of GST the taxpayer should keep premium payment-related documents such as receipt as a proof to avoid any litigation.
10. Even if the receipt of the premium paid does not contain the amount of GST separately then also one can claim the GST amount in his tax return by preserving the supporting documents like the annual statement of policy premium from the insurer.

 

Examples to understand the deduction in a better way:
Example 1:

Example 2:
Mr.X has paid a health insurance premium of Rs.23,000 for the insurance of the health of his wife and dependent children in the financial year 2017-18. He also got a health check-up done for himself and paid Rs.5,000.
Ans. Mr.X can claim a maximum deduction of Rs.25,000 under Section 80D of the Income Tax Act. Rs.23,000 has been allowed towards insurance premium paid, and Rs.2,000 has been allowed for a health check-up. The deduction towards preventive health check-up has been restricted to RS.2,000 as the overall deduction cannot exceed Rs.25,000 in this case.