Your Complete Guide for Section 80D of the Income Tax Act

Seeking options to reduce your tax liability in India? Do you know that under section 80D of the Income Tax Act, 1961, you can save up to INR 1,00,000 annually? Whether you are an Indian resident or a non-resident Indian (NRI) who is living thousands of miles away from India, you can claim this tax benefit under this section. However, to claim tax benefits on your health insurance, you need to pay taxes in India. At the same time, it provides you with both tax benefits and financial protection. While providing tax benefits, Section 80D is a way for the government to encourage health insurance coverage in India. Want to know more about this section and the applicable tax benefits under this section? Read on the blog and get your answers.

What Is Section 80D of the Income Tax Act?

Section 80D of the Income Tax Act allows you to save taxes on the health insurance premiums you pay by claiming tax deductions. Through this section, you can claim tax deduction on the paid premiums of your health insurance policies for yourself, your spouse, your parents, and your dependent children. Additionally, using Section 80D of the Income Tax Act, you can also claim a tax deduction for the top-up health plans and preventive health check-ups (subject to specified limits).

Under the present income tax laws, in a financial year, you can claim up to INR 25,000, and a tax deduction of INR 50,000 can also be claimed for yourself, spouse, parents, and children together. In case your parents are 60 years old or above and you are paying for their health insurance, you can claim up to INR 75,000 on premiums. However, if a senior citizen is an NRI or the assessee is an NRI, the extended limit of INR 50,000 is not applicable under this section. Let's take a quick overview of section 80D:

• Eligible Persons: Individuals (Indian residents and NRIs) or HUFs are eligible to claim a tax deduction. However, for this, they need to be a taxpayer in India. They can claim a tax deduction under this section on health insurance paid for
  • Self
  • Spouse
  • Parents
  • Dependent children
• Eligible Expenses: Here is the list of eligible expenses that are covered under section 80D:
  • Medical expenses are subject to the senior citizens
  • Medical insurance premiums (critical illness plans, top-up plans, and more)
  • Preventive health check-up
• Deduction Limit: Under section 80C, you can claim up to INR 1,50,000 tax deduction. Depending on the age of the individual and his/her parents, you can claim a tax deduction from INR 25,000 to INR 1,00,000 under section 80D.
• Regime Restriction: This regime is only applicable if an individual or HUF opts to pay tax in Indian under the old tax regime.

This is all about section 80D of the Income Tax Act. Moving forward, let's know who is eligible to claim a tax deduction under this section.

Who Is Eligible for Claim Tax Deduction Under Section 80D?

Under section 80D of the Income Tax Act, you can claim a tax deduction if you are a resident Indian, NRI, or HUF who pays taxes in India. This deduction is specifically applicable to the health insurance premiums you paid to insurance companies in India. The tax deduction structure under section 80D is the same for Indian residents and NRIs. Moving further, let's know the exemption limit available under this section.

• Medical or health insurance covering yourself, spouse, and dependent children
  • If you are Below 60 Years: up to INR 25,000 deduction
  • If you are 60 Years Old or Above: Enhances tax deduction up to INR 50,000
• Additionally, you are also eligible to claim a tax deduction for the paid health insurance premiums of your parents:
  • If Parents are Below 60 Years: up to INR 25,000 (extra)
  • If Parents are 60 Years or Above: up to INR 50,000 (extra)
• This made several possible situations that estimate your total tax claim:
  • If You and Your Parents are Under 60 Years: up to INR 50,000 total tax deduction
  • If You are Under 60 Years and Your Parents are Above 60 Years: up to INR 50,000 total tax deduction
  • You and Your Parents Both are Senior Citizens (Above 60): up to INR 1,00,000 possible deduction

This was all about who is eligible for a tax deduction under section 80D of the Income Tax Act and the available deduction limit. However, NRI senior citizens are not eligible to claim a higher tax deduction under this section. So, to get maximum tax benefits under this section, it is advisable for you to buy different health insurance policies for you and your parents. This helps you to claim the maximum tax deduction. Furthermore, let's know the tax deduction allowed under this section.

What Deductions are Allowed Under Section 80D?

Under section 80D of the Income Tax Act, 1961, related to medical expenses and health insurance premiums payments, you can claim tax deductions, such as:

Health Insurance Premiums

This is the most common tax deduction people claim under Section 80D. In this, you can claim up to INR 25,000 for the insurance premium you paid for yourself, spouse, parents, or dependent children. In case your parents are 60 or above and are resident Indians, you can claim up to INR 50,000 tax deduction.

Medical Expenses

Senior citizens who are resident Indians and aged 60 or above who do not have any health insurance by their side can claim a tax deduction of up to INR 50,000 in a fiscal year on the incurred medical expenses. While the Income Tax Act, 1961, does not have a proper or established definition for 'medical expenses,' it generally means expenses like impairment aids, medical consultation, medicines, and more.

Preventive Health Checkups

Under section 80D of the Income Tax Act, individuals can claim up to INR 5,000 tax deduction for self, spouse, parents, or dependent children's preventive health check-ups. However, in the overall section 80D, tax deduction on preventive health check-ups involves an INR 25,000 limit for individuals and an INR 50,000 limit for senior citizens (60 years or above). Confused? Let's understand this with an example.

Suppose Mr. X has paid INR 23,000 health insurance premium in the financial year 2024-25 for his wife and children. Additionally, he paid INR 5,000 for his health check-up. Here, using section 80D of the Income Tax Act, Mr. X can claim up to INR 25,000 tax deduction. Here, INR 23,000 he can claim under paid insurance premium and INR 2,000 for a health check-up. Here, the preventive health check-up amount has been restricted to INR 2,000, as under section 80D, the overall tax deduction cannot be more than INR 25,000. 

Contributions Made to Central Government Health Scheme (CGHS)

Under section 80D for contributions made to the central government health scheme (CGHS) or any other government-notified scheme, an individual can claim a tax benefit up to INR 25,000 in a fiscal year. However, under this, any contribution you made on behalf of your parents' health scheme is not eligible to be claimed under this section.

Multi-Year Health Insurance Premium Paid in Lump-Sum

In India, many people purchase multi-year health insurance premiums from the insurance companies to get a long-term policy discount. At the time of buying the policy, if you have paid the multi-health insurance premiums in a lump sum, under section 80D of the Income Tax Act, you can only get the proportionate tax deduction per fiscal year. Furthermore, under section 80D, like 1-year health insurance policies, the tax deduction available on the multi-year health insurance premiums is subject to an overall tax limit of INR 25,000 for individuals and INR 50,000 for senior citizens.

For instance, Mr. D purchased a 2-year health insurance policy and paid an INR 30,000 health insurance premium. Here, under section 80D of the Income Tax Act, Mr. D can claim INR 15,000 as a tax deduction in each of his 2-year health insurance policies in two years.

These are the tax deductions allowed under section 80D of the Income Tax Act. Moving ahead, let's know the available tax deductions under this section.

What Are the Tax Deductions Available Under Section 80D?

Under section 80D of the Income Tax Act, based on the health insurance premiums, you can claim a tax deduction on the premiums you pay for yourself, your parents, and your family. Here, the tax amount you save totally depends on the age of the insured persons. To provide you with an idea, the table below shows the deduction amount available to a taxpayer under several scenarios:

Note: Note that under the preventive health check-up, family includes only spouse and dependent children. Within the overall tax limit of INR 25,000/ 50,000, one can only claim up to INR 5,000 tax deduction for a preventive health check-up.

For instance, Mr. A is a 45-year-old person, and his father is 75 years old. Mr. A has purchased medical health insurance for both himself and his father, for which he pays INR 30,000 and INR 35,000, respectively. Under section 80D of the Income Tax Act, how much tax deduction can he claim?

Answer: Mr. A, under section 80D, can claim a maximum of INR 25,000 tax deduction for the insurance premium he paid on his policy. Additionally, as his father his above 60 years, he can claim a tax deduction of up to INR 50,000 on the premium he paid for his policy. In the given scenario, he will receive a total tax deduction of INR 60,000 ( INR 25,000 + INR 35,000) on the insurance premium. Here, the insurance premium of his father will be completely covered under the tax deduction.

This was all about the tax deduction limit mentioned under section 80D. Moving further, let's know the payment modes eligible under this section.

Mode of Payments Eligible for Section 80D Deductions

Under section 80D of the Income Tax Act, the following payment modes are applicable for tax deductions:

These are the modes of payment available for tax deduction under section 80D. Moving ahead, let's review the key things to consider when applying for this section.

Things to Consider When Availing Section 80D Deductions

While availing tax deduction under section 80D of the Income Tax Act, consider the following things:

• Under section 80D, if you paid health insurance premiums in cash, you cannot avail of tax deductions.
• In case payment of medical insurance premiums is done by the person and the parent in part, then under section 80D of the Income Tax Act, they both are eligible to claim a tax deduction.
• Medical insurance premiums paid for grandparents, siblings, uncles, and aunts cannot be claimed under section 80D for tax deduction.
• Under section 80D of the Income Tax Act, payment of group health insurance premiums by the employer is not allowed to claim a tax deduction.
• On behalf of the working children, insurance premiums paid by parents are not eligible for a claim tax deduction under section 80D.
• Additionally, you cannot claim a tax deduction on the cess amount and service tax added to your health insurance premiums.

These are the things that you should consider while applying for tax deduction under section 80D of the Income Tax Act.

Final Thoughts

During medical emergencies, health insurance provides you with financial protection and promotes regular health check-ups. It aligns with the objective of the government to provide access to healthcare to all and reduce medical costs. In this knowing about section 80D of the Income Tax Act helps you to make the right decisions while opting for a correct health insurance plan and increase your tax savings. Here, the complete blog was about it. I hope after reading it, you get all the information. Furthermore, if you need more guidance on it and do not know how to claim a tax deduction under this section, contact Savetaxs. We have a team of tax experts who can help you in this and provide you with the right solutions. So connect with us now and avail of the tax benefits under this section.