Deduction u/s 80D of Income Tax Act – Explained

Medical emergencies can strike unexpectedly, and with the rising costs of healthcare in India, financial planning becomes essential to manage such crises. One crucial step in preparing for medical emergencies is investing in health insurance policies for your family. In this article, we will delve into Section 80D of Income Tax Act, which not only offers financial protection but also provides tax benefits.

In India, it has been observed, that most families depend on their life insurance rather than health insurance policies and thus, many families get ruined when their loved ones need medical attention, especially if they are suffering from terminal diseases. So, it is high to understand how much crucial a health insurance policy is and one can also avail of tax benefits under section 80d as well. Here in this article, you will read about section 80d of the income tax act in detail.

What is Section 80D of the Income Tax Act?

The income Tax Department of India offers tax deduction benefits for all its citizens to have a health insurance policy, under section 80d of the act. This section states that every individual and HUF are eligible to enjoy deductions from their annual income for the premium paid for health insurance policies in a particular financial year for which the tax is to be computed. 80d deduction is available on both health insurance plans which include critical illness plans, top-up plans as well as preventive check-ups. Moreover, you can claim a deduction for the premium paid on the health insurance of your family members as well under this section of the IT act.

The 80d limit varies according to the age of the assessee and also for the age of their parents if they are availing deductions on their health insurance premium as well. We will discuss the same in detail in the later section of the article.

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Eligibility Criteria to Claim Tax Deductions Under Section 80D

1. Any individual who is a resident Indian or NRI* and Hindu Undivided Family (HUF) can claim a deduction under section 80D. You can claim a deduction for the health insurance premium paid for –
   • Self
   • Spouse
   • Dependent children
   • Parents
2. A company or any other entity except the two mentioned above that are –individual and HUF cannot claim any deduction u/s 80D of the IT Act. Also, you cannot claim a deduction under this section for insurance premiums paid for anyone else other than your spouse, dependent children and parents.

* NRI can claim a deduction for health insurance premiums paid for their spouse, dependent children and parents who are resident Indians, not for themselves.

Which Payments Are Eligible for Deductions Under Section 80D?

The amounts that are eligible for the 80d deduction limit include –

1. The health insurance premium is paid in any form other than cash for yourself, or your spouse, depending on children and parents.
2. Medical expenditure for preventive health check-ups
3. If your parents are senior citizens and they are not covered by any health insurance, then medical expenditure up to a certain amount can be claimed as a deduction for them. Here, senior citizen means people aged above 60 years.
4. Also, you can claim a deduction for the contribution made to CGHS or any such scheme as mentioned by the government from time to time.

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What Is the Maximum Deduction Available Under Section 80D?

The maximum 80d deduction limit varies according to the age of the taxpayer and for whom he or she is purchasing the health insurance premium or the medical expenditure incurred.

1. Individuals (less than 60 years old):
   • Maximum deduction of Rs. 25,000 for self, spouse, and dependent children.
   • Additional deduction of up to Rs. 25,000 for parents (if they are not senior citizens).
2. Individuals (60 years old or above) and parents (60 years old or above):
   • Maximum deduction of Rs. 50,000 for self, spouse, and dependent children.
   • Additional deduction of up to Rs. 50,000 for parents.
3. If both the taxpayer and parents are senior citizens, they can each claim a maximum deduction of Rs. 50,000.
4. If a senior citizen taxpayer pays for medical expenses for non-insured parents, they can claim a deduction of up to Rs. 50,000.

Let’s take an example to understand this better –

Scenario 1 : Suppose you are 30 years old and your father is 55 years old and you have purchased a health insurance policy for both where you have to pay an annual premium of Rs. 15000 for your health insurance and Rs. 30000 for your father’s health insurance.

In this scenario, you can claim a deduction u/s 80D of Rs. 15000 for the premium paid for your health insurance and for your father, you can claim a deduction up to Rs. 25000, not the entire premium that you pay as the maximum limit for non-senior citizen parents is Rs. 25000.

Scenario 2 : You are 42 years old and you have purchased a family floater health insurance policy for yourself, your spouse and your dependent children. The premium for this policy is Rs. 40000 per year. You have your mother who is of 65 years and for her, you have purchased another health insurance policy for which you pay Rs. 30000 annually.

In this scenario, you can claim a maximum of Rs. 25000 as a deduction u/s 80D for the family floater plan bought for yourself, your spouse and dependent children. While for the health insurance policy of your mother, who is a senior citizen, you can claim a deduction on the entire premium of Rs. 30000 as the maximum deduction limit for her is Rs. 50000 in an FY.

Scenario 3 : You are 40 years old and living with your spouse (35 years) and mother. Your mother is 70 years old. Now, you have purchased a mediclaim policy for yourself and your spouse for which you pay Rs. 30000 in a year. However, your mother has no health insurance policy. In FY 2022-23, your mother had to be hospitalised, and the hospital bill was Rs. 2 lakhs.

In this scenario, you can claim a deduction of Rs. 25000 for the insurance premium paid for the health insurance of yourself and your spouse. While since your mother had health insurance, but medical expenditure was there, for that, you can claim a deduction of Rs. 50000 u/s 80D of the IT Act.

Scenario 4 : Suppose you and your wife are staying with your father. While you are 61 years old, your wife is 60 and your father is 85 years old. You have purchased health insurance policies for your father and a family floater plan for yourself and your spouse. For the family floater, you pay Rs. 40000 in a year while for the health insurance of your father, you pay Rs. 55000 in a year as premium.

In this scenario, you can claim Rs. 40000 as a deduction u/s 80D for the family floater plan purchased for yourself and your wife. While for your father, you can claim a deduction of up to Rs. 50000 for the health insurance premium.

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What Are the Factors Excluded Under Section 80D?

While claiming a deduction under section 80D of the IT act, you need to keep in mind the following factors –

• You cannot claim a deduction for paying for the health insurance premium of your siblings, uncles, or any relative other than your spouse, dependent children and parents.
• If your children are working, and not dependent on you financially, you cannot claim a deduction for their health insurance premium.
• You cannot claim a deduction for the service tax and cess percentage on the premium paid for health insurance premium
• If you are under a group health insurance policy provided by your company, you cannot claim a deduction for the same.
• If the premium is paid in cash, then you cannot claim a deduction for the same u/s 80D.

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