Section 80D Of Income Tax Act: Deductions For Medical & Health Insurance

Onsurity Editorial
November 19, 2024
10 min read

Table of Contents

Section 80D Of The Income Tax Act

India has undergone various tax reforms to ensure that certain individuals and entities remain protected while fulfilling their civic duties. One such instance is the tax exemption on health insurance premiums, covered under the Income Tax Act of Section 80D, 1961.

Despite the increasing awareness and exposure, over 40 crore individuals in India still need to be protected by any type of health insurance cover. That is approximately 31% of the country’s population exposed to potential financial risks caused by the rising healthcare costs.

Due to various factors, such as – lack of penetration, low awareness, lack of product understanding, and high premium rates, there is a sizeable health protection gap. Therefore, to mitigate this gap and to encourage more individuals to get health insurance, the Indian government proposed various tax exemptions on health insurance under section 80D of the income tax.

Let’s talk in-depth about what Section 80D is and understand how you can make the most of your health insurance by leveraging this tax benefit.

What Is Section 80D Of The Income Tax Act?

Section 80D of the Income Tax Act is a provision that allows an individual or Hindu Undivided Families (HUFs), to claim an income tax deduction from their taxable income to pay for the health insurance premium.

Any premium paid for self, spouse, children, and dependent parents is exempt from tax under this act. In addition to the health insurance premium, contributions made to the Central Government Health Scheme and health checkups also qualify for a tax deduction under Section 80D.

If you’re looking to safeguard your finances against health-related expenses, do note that there is a different provision for life insurance, under which you can claim deductions separately under Section 80C of the Income Tax Act. And, a claim can be filed for Section 80D, over and above the Section 80C deductions of up to Rs. 1.5 lakh.

Point of Consideration: Deductions under Section 80D can only be claimed by individuals or HUFs who choose to file tax under the old regime.

Also read: What is Employer Employee Insurance?

Who Is Eligible To Claim Deductions Under Section 80D?

Individuals or Hindu Undivided Families (HUFs) can claim deductions under Section 80D for:

Self
Spouse
Children
Dependent Parents

A formal entity, like a business organisation, can not file claims for group health insurance under section 80D. Premiums paid towards group health insurance can be claimed by employers under Section 37 of the Income Tax Act.

Type of Deductions Eligible Under Section 80D

The following types of payments made by individuals or Hindu Undivided Families (HUFs) are eligible for deductions under Section 80D:

Health insurance premium paid for self, spouse, children, or parents (payments made in cash not included)
Preventive health checkups with the upper cap of Rs. 5,000 (payments made in cash are also eligible for deductions in this case)
Medical expenses paid in any mode other than cash for treating an uninsured senior citizen (aged 60 years and above)
Payment made towards the Central Government Health Scheme or any other government health scheme (payments made in cash are not eligible for this deduction)

1. Deduction For Preventive Health Checkup

To promote preventive healthcare, the government introduced an additional provision under Section 80D for health checkups in 2013-14. The maximum amount that can be claimed for health checkups is Rs. 5,000 per financial year. This amount is inclusive of the overall health insurance deduction and not an addition to the existing limit of Rs. 1 lakh.

The deduction for preventive health checkups can be claimed by the taxpayer, their spouse, children, and parents. And unlike the health insurance premiums, the amount paid for a health checkup can be paid in cash and still be eligible for the deduction under Section 80D.

There are many advantages of getting a preventive health checkup done, at least once every year. It helps in the early detection of disease, managing lifestyle disorders or conditions, keeping overall health expenses low, and staying prepared in the face of medical emergencies.

2. Deduction For Medical Expenses For Senior Citizens

Under Section 80D of the Income Tax Act, taxpayers can claim deductions for medical expenses of senior citizens, who are 60 years old or above and are not insured. Deduction for medical expenses of senior citizens is part of the limit of Rs. 50,000, solely dedicated to senior citizens under Section 80D. If the senior citizen has health insurance, the amount paid towards the premium and any additional medical expenses incurred will be included within this limit.

A total deduction of Rs. 1 lakh can be availed under Section 80D. For instance, if the taxpayer is a senior citizen then they can claim up to Rs. 50,000 in medical expenses and health insurance for themselves and an additional Rs. 50,000 for the healthcare expenses of their senior citizen parents.

3. Deduction For Central Government Health Scheme

The government of India provides this comprehensive health scheme to government employees, pensioners, and their dependents, who can utilise medical facilities through dispensaries and empaneled hospitals across India. Contributions made by individuals toward CGHS qualify for deductions under Section 80D. Both health insurance premiums and CGHS contributions are included in the total limit allocated for deductions under Section 80D.

4. Deduction For Health Insurance Premiums

Deductions for health insurance apply to premiums paid for insuring – self, spouse, children, and parent. However, the maximum limit of the deduction varies on the age of insured individuals.

For Self, Spouse, And Dependent Children:

Up to Rs. 25,000 for individuals below the age of 60 years (limit per financial year)
Up to Rs. 50,000 for senior citizens above the age of 60 years (limit per financial year)

For Parents:

Additional deduction of up to Rs. 25,000 for parents below the age of 60 years (limit per financial year)
Additional deduction of up to Rs. 50,000 for parents above the age of 60 years (limit per financial year)

Please note that this limit is inclusive of deductions for health checkup costs and contributions made towards CGHS.

Also read: Top 10 Health Insurance Companies in India

5. Deduction For HUFs (Hindu undivided family)

Deductions on health insurance premiums under Section 80D are available to any member of the HUF. Similar to individual taxpayers, HUF members, aged 60 years or below can claim tax deductions of up to Rs. 25,000. Whereas, HUF members above the age of 60 years can claim a tax deduction of up to Rs. 50,000.

Shown in the table below is a quick recap of what deductions under Section 80D would look like in various scenarios:

Coverage	Deduction For Health Insurance	Deduction For CGHS	Deduction For Preventive Health Checkup	Maximum Deductions Allowed
Self + Spouse + Children	Rs. 25,000	Rs. 25,000	Rs. 5,000	Rs. 25,000
Self + Spouse + Children + Parents (age below 60 years)	Rs. 50,000	Rs. 25,000	Rs. 5,000	Rs. 50,000
Self + Spouse + Children + Parents (age more than 60 years)	Rs. 75,000	Rs. 25,000	Rs. 5,000	Rs. 75,000
Self + Spouse (anyone above 60 years) + Children + Parents (age above 60 years)	Rs. 1 lakh	Rs. 50,000	Rs. 5,000	Rs. 1 lakh
Members of HUF	Rs. 25,000	–	Rs. 5,000	Rs. 25,000
Members of HUF (age above 60 years)	Rs. 50,000	–	Rs. 5,000	Rs. 50,000

Section 80D Provisions For Multi-Year Health Insurance Premium Paid In Lump-Sum

So, claiming deductions for health insurance premiums paid for multiple years in lump-sum can seem tricky but it’s quite simple. Under Section 80D, the total premium is proportionately divided across the years for which the policy is valid and then the premium amount for each year can be claimed for deductions under Section 80D.

For example:

Rajesh pays a premium worth Rs. 60,000 in lump-sum for a health insurance policy valid for three years, the amount eligible for deduction every year will be:

Rs. 60,000 ÷ 3 = Rs. 20,000

This Rs. 20,000 will be eligible for deductions every financial year for a 3-year period, subject to the overall limit under section 80D (Rs. 25,000 or Rs. 50,000, depending on the age bracket of the individual).

Important Points To Consider Before Claiming Deductions Under Section 80D

Health insurance premiums paid for relatives such as siblings, grandparents, aunts, or uncles are not eligible for tax deduction

Premiums paid on behalf of working children, spouse, or parents are not eligible for tax deductions

If both, an individual and a parent contribute to the premium, each can claim a deduction for the amount paid individually under section 80D

Deductions should be calculated excluding any service tax and cess included in the premium

Group health insurance premium provided by an employer is not eligible for deduction

Premiums paid through methods other than cash, including credit cards and online payments, are eligible for deduction (except for payment made in cash for a preventive health checkup)

Quick read: Group Health Insurance vs Individual Health Insurance

Section 80D Deductions Under Old Tax Regime Vs. New Tax Regime

If you are wondering how to leverage the current taxation system to efficiently file a claim then don’t worry you are not alone. It can be a bit confusing to understand which scenario is most efficient for maximising gains at the time of filing tax returns.

To understand that better let’s look at what the old tax regime is and what are the changes that have been made in the new tax regime post the budget update of 2024.

Old Tax Regime

The old tax regime provides various deductions and exemptions to taxpayers, including Section 80D, which allows individuals and HUFs to claim deductions for health insurance premiums and preventive health checkups. A maximum deduction of Rs. 1 lakh can be claimed under Section 80D.

New modifications to the tax regime have still not been made mandatory so the taxpayers can still file taxes under the old regime. In case they decide to do so, they can claim deductions under Section 80D, along with various other deductions such as – Section 80C, 80G, and more.

New Tax Regime

In case you are planning to file your taxes under the new tax regime then you already know that deductions under Section 80D cannot be claimed. However, for the uninitiated, the new tax regime offers lower tax rates under various tax slabs without considering most deductions under Chapter VI-A.

To put it plainly, individuals opting to file taxes under the new regime can no longer claim deductions against health insurance premiums, preventive health checkups, and various other health-related expenses that were previously covered under Section 80D. The new tax regime is best suited for people who have minimal investments or deductions to claim, and who benefit more from lower tax rates rather than filing for itemised deductions under the old regime.

Also read: Medical Inflation in India

Incorporating Section 80D Deductions At Workplace

Managing deductions for tax filing of employees offers various advantages to both employees and employers. HR teams should give regular training sessions to employees, explaining the limitations and updates in the tax filing system to help them make informed decisions.

By helping employees leverage tax benefits associated with Section 80D, organisations can showcase their commitment to the well-being of their employees and in turn improve compliance at the workplace.

Organisations that have incorporated tax filing assistance have reported improvements in employee satisfaction and reduced work disruptions during tax season. Integrating tax filing advisory at the workplace can also benefit organisations in the following ways:

Enhanced employee satisfaction
Productivity boost
Attractive employee benefit

Tax filing can be complex and disruptive; by helping employees do it effectively, organisations can help their employees maximise their gains without causing too much disruption, making it an excellent “employee benefits” initiative to introduce at your organisation.

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FAQs:

1. What is the limit of 80D exemption?

The maximum limit deductions under Section 80D is up to Rs. 1 lakh. This upper limit is only applicable when both the taxpayer and the dependent parents are above the age of 60 years.

2. Is proof required for 80D medical expenditure?

For substantiating claims made against medical expenses, the taxpayer must provide documents such as bills, receipts, and prescriptions. Additionally, presenting medical reports for audit and verification can further solidify the claims.

3. How do I claim section 80D in ITR?

To file deductions under Section 80D, it is extremely crucial to first understand the deduction limits and eligibility. Secondly, you can log in to the e-Filing portal and select the appropriate ITR form (ITR-1 is generally used for salaried individuals with simple tax returns). Once, you have selected the form, then navigate to the section for Deductions under Chapter VI-A, and fill in the details and premium amount under Section 80D. Finally, verify the information and click on submit.

4. What types of health insurance is eligible under Section 80D?

Premiums paid for individual health insurance, mediclaim, Central Government Health Scheme, and preventive health checkups are all eligible for filing tax returns under Section 80D.

5. Are medical bills deductible under Section 80D?

Yes, medical expenses for senior citizens (above the age of 60 years) can be claimed for deductions under Section 80D. The combined amount for claiming deductions for medical expenses, preventive health checkups, and health insurance premiums for senior citizens is up to Rs. 50,000.

6. Can I claim the deduction for policies taken in someone else’s name?

You can claim deductions for health insurance premiums paid for the following individuals: Self, Spouse, Dependent Children, and Parents.

7. Can I claim deductions for health insurance premiums paid through my employer?

No, deductions against group health insurance cannot be claimed under Section 80D. Only individuals or Hindu Undivided Families (HUFs) can claim deductions under Section 80D.

8. Is there any age limit for parents to claim the deduction?

No, according to the latest financial budget, there is no age limit for parents to claim deductions under Section 80D. In fact, for senior citizens, the maximum amount that can be claimed is up to Rs. 50,000. Whereas, for individuals below the age of 60, the maximum amount that can be claimed is Rs. 25,000.

9. How does the deduction under section 80D affect my taxable income?

Your net taxable income is the portion that is subject to tax. So, when you pay for health insurance premiums or medical expenses, it is deducted from your gross total income. This lowers your net taxable income and also lowers your overall tax burden.