Health insurance policies- either individual, family floater or for our elderly parents, are always a boon. Not just because they take care of all the medical payments at the time of a health scare but also because they help you save taxes. Section 80C of the Income Tax Act does not consider the sum insured we receive from an insurance policy as an income.
Despite that, many senior citizens do not own a health insurance policy. This is because insurers charge a hefty premium for coverage extended to the elderly. The rationale being- since they are no longer in their prime, they are more prone to illness than others and many cannot afford to pay such a high price.
Moreover, if they already suffer from one ailment or another at the time of purchase, insurance companies may even refuse to sell policies to them. This leaves senior citizens with no option but to spend money from their own pockets when a medical emergency arises.
In this bleak scenario, Budget 2018 brought a breather for people aged 60 years or above who do not have a health insurance policy and are suffering from an illness that is draining their savings. To this effect, it has amended Section 80 D and introduced Section 80 DDB.
What is Section 80 DDB?
This section makes provisions for tax deduction on expenses arising out of the medical treatment of specific illnesses. Only individuals (and not corporates or firms) are entitled to the tax deductions.
You can avail benefits if you:
- Are a member of a Hindu Undivided Family
- Have been a resident of India during the last financial year (Non-resident Indians are not eligible to deductions).
- Are not covered by any medical policy
- Have spent money for the treatment of a dependant (spouse, children, senior citizen parents or siblings)
Who is eligible for tax deduction?
This section explicitly states that only those who are actually incurring expenses can make a claim. So, if you are a senior citizen and are bearing the cost of treatment yourself, then you can avail these tax benefits. But, if your children are paying for your treatment, then, they need to claim the deduction.
What does the Tax Deduction cover?
There is no clear definition of ‘medical expenditure’ in the Income Tax Act. Tax deduction for super senior citizens (aged 80 years or more) was introduced in 2015. Senior citizens were brought into the fold in 2018. For them, medical expenses can mean anything from doctor’s consultation fees, medicines, therapy, hearing aids or a pair of spectacles. All these expenses are entitled to a deduction.
Section 80 DDB also includes certain illnesses, the treatment of which merits deduction:
- Neurological ailments
- Malignant cancers
- Chronic Kidney Failure
- Haematological ailments like thalassemia and haemophilia.
What documents do you need to produce?
You simply need a prescription/certificate from a doctor with the relevant medical degree specializing in the ailment you have been diagnosed with. Before 2016, only a prescription from a doctor practising in a government hospital was accepted. Since then, the rule has been relaxed, allowing private practitioners too.
The prescription should clearly state:
- The name of the patient
- Type of illness
- Name, address and registration number of the specialist
- Name and address of the hospital if the government sponsors it
Remember to keep at hand documents like identity proof, medical invoice etc.
How will you file for a tax deduction?
To claim tax benefits under Section 80 DDB, you need to procure Form 10-I. The form should contain:
- The applicant’s name
- Address and name of applicant’s father
- If the applicant is a dependant, then the name and address of the person providing
- The name of the disease
- The registration number and the name of the doctor you are consulting
- Signature of the applicant
How much money can you claim as Deduction under Section 80 DDB?
The amount that is deducted from your taxable income as health care expenses, hinges solely on the age of the person who needs the medical treatment. Here are the deductions and their corresponding age limits from the revised tax deduction rules –
- People who are less than 40 years old – INR 40,000
- Senior citizens aged above 60 years- INR 100,000
- Super senior citizens above 80 years of age – INR 100,000
Previously super senior and senior citizens used to receive INR 80,000 and INR 60,000 as tax deduction, respectively. The revised tax deduction rules will come into effect from 1st April 2019.
Also, remember that you can only make a claim if you can prove that you have made payments through banking channels like net banking, debit or credit cards, cheques, through UPI or E-wallets.
What if a group health insurance policy covers your parents?
Often working professionals include their elderly parents in a group health insurance policy provided by the employer. In that case, are senior citizen parents still eligible for tax deduction?
One of the conditions for claiming tax deductions is that no health insurance policy covers the person. So, even if it is your employer and not you who pays the premium, your parents will be under an insurance umbrella and that would disqualify them from receiving these tax benefits.
What about Preventive Health Care Deduction?
Section 80D also lets you claim a tax deduction of up to INR 5000 for a regular OPD preventive health care check-up. It has nothing to do with provisions of section 80 DDB. Claiming one does not bar you from the other.