Can’t buy health insurance for parents and don’t have money to invest under section 80C for tax saving? You can still save tax under section 80D by claiming deduction for medical expenditure for your parents. Here’s how.
We all know that apart from buying health insurance policy for ourselves or family members, we can also save tax by buying health insurance for our parents. But as one grows older, the premium on health insurance goes up.
Premiums paid for health insurance policies, especially for senior citizens, are on the higher side. And not everyone can afford to pay such higher premiums. Insurers may also be reluctant to provide medical insurance for those who are old and/or suffer from pre-existing ailments.
However, Budget 2018 brought some relief for senior citizens aged 60 years and above who incur high medical expenses and are unable to buy health insurance policy due to pre-existing conditions or can’t afford the high premiums.
Budget 2018 has amended Section 80D of the Income Tax Act which allows deduction for medical expenditure incurred on senior citizens. This deduction can be claimed by the senior citizen himself/herself or by his/her children, if the latter are incurring medical expenditure for their senior citizen parents.
Here’s what all you need to know to claim the above mentioned deduction.
Eligibility to claim deduction
Chetan Chandak, Head of Tax Research, H&R Block says, “One of the conditions to claim deduction is that medical expenditure must be incurred on the family members and/or parents who are aged 60 years and above. The law defines family members as the person himself, spouse and dependent children. Another condition is that the person for whom medical expenditure has been incurred should not be covered under any health insurance policy.”
Who can claim this deduction?
This deduction for medical expenditure can be claimed by the person who has incurred the medical expenditure. Therefore, if you are a senior citizen and are not covered under any health insurance policy, then you can claim the deduction yourself.
On the other hand, if you have incurred medical expenditure during the financial year for your parents (aged 60 years and above), then you can claim the deduction.
What is covered under medical expenditure?
The Income Tax Act does not define medical expenditure. Chartered Accountant Naveen Wadhwa, DGM, Taxmann.com says, “Deduction for medical expenditure was introduced by the Finance Act, 2015 for super senior citizens (aged 80 years and above). It was further extended to senior citizens (aged 60 years and above) in Budget 2018 who were usually not covered under any health insurance policy. Though medical expenditure is not defined anywhere in the Act, but going by the motive, medical expenditure should cover every medical expense whether or not these expenditure are covered under any health insurance policy. Therefore, you can say that expenses such as consultation fees, medicines, hearing aids and so on can be claimed as deduction.”
Remember medical expenditure on certain specified illnesses are also covered under Section 80DDB. “If you have exhausted the limit under this section, you can claim deduction for the medical expenses under section 80D, provided you satisfy other conditions. These conditions are: (i) expenses should be incurred for a person aged 60 years and above and (ii) he/she should not be covered under any health insurance policy”, adds Wadhwa.
Only expenditure for specified diseases can be claimed under section 80DDB and the amount of deduction depends on the age of person for whom it is claimed. However, in case of deduction for medical expenditure under section 80D, all types of medical expenditure are covered but only people over 60 years are eligible.
Also Read: All about deduction under Section 80DDB
Along with not defining the term medical expenditure, the income tax Act also does not specify what documents you should keep to claim this deduction. Even then, it would be prudent to keep documentary evidence such as medical bills, invoice of medicines and others, in case the income tax department asks you to prove the claim of your deduction.
Chandak says, “To establish the proof of medical expenses, one must keep the doctor’s prescription along with the copy of invoices/receipts of the consultation fees, diagnostic tests, medicine bills etc. would be required.”
Mode of payment
Wadhwa says, “As per the law, payment of premium on medical policy or medical expenditure will be available only if payment is done via any mode other than cash. Therefore, one can use banking channels such as net-banking, cheque, debit card etc., or digital channels such as UPI, mobile wallets to make payments. ”
Remember, if the payment on medical expenditure is made in cash, then you will not be able to claim the deduction.
Corroborating the views above, Chandak says, “Medical expenditure (other than for preventive health check-up) incurred in cash, will not qualify for deduction under this section.”
Maximum deduction allowed
The maximum amount that can be claimed as a deduction for medical expenditure incurred under section 80D is same as the maximum deduction that can be claimed for the premium paid for health insurance. You can claim maximum deduction of Rs 50,000 in a financial year for the expenses incurred.
|Nature of amount spent||Age below 60 years||Age above 60 years||Age below 60 years||Age above 60 years|
|Medical Insurance (Rs)||25,000||50,000||25,000||50,000|
|CGHS (Rs)||25,000||25,000||Not Available||Not Available|
|Health Check-up* (Rs)||5,000||5,000||5,000||5,000|
|Medical Expenditure** (Rs)||Not Available||50,000||Not Available||50,000|
|Maximum deduction U/S 80D (Rs)||25,000||50,000||25,000||50,000|
*Health Check-up: Maximum deduction of Rs 5,000 shall be allowed for the payment made on account of preventive health check-up of self, spouse, dependent children, father and mother.
** Medical expenditure is allowed if no amount is being paid towards health insurance of such person
What if parents are covered under medical insurance from your employer?
The main condition to claim the deduction for medical expenditure incurred is that the senior citizen should not be covered under any health insurance policy.
Wadhwa says, “As per Section 80D, the deduction for medical expenditure will be allowed only if no amount has been paid to keep a health insurance policy active. However, it does not specify whether the premium paid by employer will make claim of deduction for the medical expenditure incurred ineligible. It only specifies that no premium should be paid to keep the insurance policy active. Therefore, the deduction will not be allowed regardless of who pays the premium.”
Not to be confused with preventive health check-up
Section 80D also allows deduction for preventive health check-up for maximum Rs 5,000. The payment for preventive health check-up can be made in cash as well. The amount of Rs 5,000 comes under the overall deduction available to individual as per section 80D as per the table above.
“Preventive health check-up as the name itself suggests is an expense which one incurs on preventive measures for early detection and safeguard against possible exposure to any disease in future. On the other hand, deduction on medical expenditure would cover expenses incurred for treating of existing diseases or ailments”, adds Chandak.