With an increase in age, your expenses on healthcare also go up. Especially after the 60-year mark, healthcare expenses increase swiftly. During the sunset years, most people carry their life on either interest income or pension. Meeting all healthcare expenses with this limited amount of money is very challenging. Any unexpected medical emergency can cause tremendous financial distress, which can make the situation even worse. A health insurance plan covering all old-age specific medical conditions is a must to avoid this financial crisis. But unfortunately, in India, only a few insurers offer a Senior Citizens Health Insurance plan (for above 60 years). Further, many people who were covered under group insurance plans by employers during their service year and didn’t bother to buy a separate health cover find it hard to cope with the healthcare expenses after retirement due to the sudden disappearance of their health covers. Such instances can create a lot of anxiety among the seniors.
By considering all these circumstances, in 2018, the Government of India amended Section 80D of the IT Act and made the medical expenses of the senior population a valid tax deduction.
Deduction under 80D
Under Section 80D of the IT Act, a senior a citizen can get a tax deduction of up to Rs.50,000 for the premiums paid for health insurance plans.
If no sum is produced as the premium of a health insurance, i.e., for a senior citizen without any medical insurance, the medical expenses incurred by him/her are eligible for deduction under Section 80D. Medical expenses paid by you for your senior parents (60 years and above) are also eligible for this deduction.
Suppose you’re a taxpayer above 60 years of age and you’ve dependent parents. In this case, you can get a tax deduction of up to Rs.50,000 for your medical bills in a financial year. In addition to this, you’re eligible to get a tax deduction of up to Rs.50,000 in the same financial year if you pay the medical bills of your senior parents. In short, a tax deduction of a maximum of Rs.1 lakh in a financial year under Section 80D is possible.
You can enjoy this benefit only if you make digital payments for these medical expenses, i.e., payments through credit/debit cards, mobile wallets, net banking, etc., are only eligible for this benefit.
Let’s consider another situation. Suppose you’re a taxpayer below 60 years of age and have dependent parents who are senior citizens, and they’re not covered under any health insurance plans. In this case, under Section 80D, you’re eligible to get a tax deduction of Rs.25,000 for the premium paid for your health insurance and an additional Rs.50,000 paid for the medical expenses of your senior parents. Thus, you can save up to Rs.75,000 under Section 80D in a financial year.
Deduction under Section 80DDB
Apart from Section 80D, a tax deduction is allowed under Section 80DDB for specific diseases. The conditions are:
● The claim can be made for self or dependent (spouse, dependent children, parents and siblings).
● The benefit is available for Indian residents only.
● The taxpayer must have made the payment of the medical expenses.
● If any payment is received from the insurer or employer, that amount should be subtracted from the deduction.
● A prescription from a qualified specialist is a must to get the benefit under Section 80DDB.
The maximum deduction allowed under Section 80DDB for the payment made for the medical expenses of a senior person (either self or a dependent) is the lowest of Rs.1 lakh or an amount actually paid.
If your medical condition comes under the specified diseases mentioned in Section 80DDB, it’s wise to claim the deduction under this section as you get more benefits under it. If the expenses go beyond the upper limit, you can claim the exceeding sum under Section 80D. On the other hand, if your medical condition is not included under the specified diseases mentioned in Section 80DDB, you can only claim under Section 80D. To make things simple and easy, it’s better to take a senior citizen insurance plan as early as possible. While buying a plan, don’t forget to check the waiting period for pre-existing diseases. Always buy a health insurance that has a lower waiting period and minimum co-payment.