INDEX
- Introduction
- What is Section 80D?
Who is Eligible for Deduction Under Section 80D?
What Deduction is Allowed Under Section 80D?
Payments Eligible for Deduction Under Section 80D
Deduction Available Under Section 80D
Mode of Payment Under Section 80D:
Preventive Health Check-up Under Section 80D
Deduction of Medical Expenses for Senior Citizens (Section 80D)
Multi-year Health Insurance Premium Paid in Lump-sum (Section 80D)
How to Buy Medical Insurance
Section 80D of the Income Tax Act: Deductions for Medical Insurance, Limits, Eligibility, and Policies
Introduction
Health insurance helps cover unexpected medical expenses and hospital bills, providing financial support during emergencies. It is one of the most effective ways to manage such financial challenges. In India, many individuals do not have health insurance and often depend on their savings or loans during medical emergencies. To promote the purchase of health insurance, the government has introduced tax benefits under Section 80D of the Income Tax Act.
What is Section 80D?
Section 80D of the Income Tax Act allows individuals or Hindu Undivided Families (HUFs) to claim a deduction for the premiums paid on health insurance policies during the financial year. This deduction is available for not only regular medical insurance policies but also for top-up health plans and critical illness plans.
The key benefit is that this deduction is in addition to the Rs 1.5 lakh limit for deductions claimed under Section 80C.
Note: This deduction can be claimed if the individual or HUF opts to pay taxes under the old tax regime.
Who is Eligible for Deduction Under Section 80D?
- Individuals
- Hindu Undivided Family (HUFs)
No other entity, such as a company or a firm, is eligible to claim a deduction under this section.
What Deduction is Allowed Under Section 80D?
The following expenses are allowed as deductions under Section 80D:
- Medical insurance premiums paid for self, family, and parents.
- Medical expenses incurred for senior citizens.
Taxpayers (individuals or HUFs) can claim deductions for the insurance premium payments made for the following members:
- Self
- Spouse
- Dependent children
- Parents
Payments Eligible for Deduction Under Section 80D
An individual or Hindu Undivided Family (HUF) can claim a deduction under Section 80D for the following payments:
- Health Insurance Premiums (paid in any mode other than cash):
- Up to ₹25,000 for self, spouse, dependent children, or parents.
- Up to ₹50,000 if the family or parents are senior citizens (aged 60 years or above).
- Preventive Health Checkups (cash payments allowed):
- Up to ₹5,000 for self, spouse, dependent children, or parents.
- Medical Expenses:
- Senior citizens (residents aged 60 years or above) without health insurance can claim a deduction of up to ₹50,000 on medical expenses incurred.
- Note: “Medical expenditure” typically includes costs like medical consultations, medicines, impairment aids, etc.
- Contribution to CGHS/Notified Schemes:
- Individuals can claim a tax deduction of up to ₹25,000 for contributions made to the Central Government Health Scheme (CGHS) or any other notified scheme. However, contributions made on behalf of parents are not eligible for this deduction.
Deduction Available Under Section 80D
Section 80D allows the following deductions for premiums paid on health insurance policies:
- For Self & Family (below 60 years): ₹25,000
- For Senior Citizens (above 60 years): ₹50,000
The deduction can vary depending on the combination of self, family, and parents’ age groups. Below is a table showing the deduction limits under different scenarios:
Policy for? | Deduction for Self & Family | Deduction for Parents | Preventive Health Check-up | Maximum Deduction |
Self & Family (below 60 years) | ₹25,000 | – | ₹5,000 | ₹25,000 |
Self & Family + Parents (all below 60 years) | ₹25,000 | ₹25,000 | ₹5,000 | ₹50,000 |
Self & Family (below 60 years) + Parents (above 60 years) | ₹25,000 | ₹50,000 | ₹5,000 | ₹75,000 |
Self & Family + Parents (both above 60 years) | ₹50,000 | ₹50,000 | ₹5,000 | ₹1,00,000 |
Members of HUF (below 60 years) | ₹25,000 | ₹25,000 | ₹5,000 | ₹25,000 |
Members of HUF (member above 60 years) | ₹50,000 | ₹50,000 | ₹5,000 | ₹50,000 |
Note: The deduction for preventive check-up (up to ₹5,000) is included within the overall limit of ₹25,000 or ₹50,000.
Example: Manish, aged 40, has taken medical cover for himself and his 65-year-old father. He pays ₹35,000 for his policy and ₹35,000 for his father’s policy.
- Rohan can claim a maximum of ₹25,000 for his own policy.
- As his father is a senior citizen, Rohan can claim a maximum of ₹50,000 for the premium paid for his father’s policy.
- Therefore, the total deduction Rohan can claim is ₹25,000 (for himself) + ₹35,000 (for his father) = ₹60,000.
Mode of Payment Under Section 80D:
To claim the deductions under Section 80D, the payment must be made in the following specified modes:
Payment Purpose | Payment Mode |
Preventive Health Check-up | Any mode (including cash) |
Medical Insurance Premium | Any mode other than cash |
Medical Expenses | Any mode other than cash |
Note: Cash payments are not allowed as a deduction for medical insurance premiums or medical expenses.
Preventive Health Check-up Under Section 80D
The government introduced the preventive health check-up deduction under Section 80D in the financial year 2013-14 to encourage individuals to take a more proactive approach towards their health. Preventive health check-ups are designed to detect potential health issues and risk factors early, enabling timely intervention and better health management.
Section 80D allows a deduction of up to ₹5,000 for payments made towards preventive health check-ups. This deduction is included within the overall limit of ₹25,000 (for individuals below 60 years) or ₹50,000 (for senior citizens and their parents).
Key Points:
- The deduction of ₹5,000 can be claimed for payments made towards preventive health check-ups for the individual, their spouse, dependent children, or parents.
- This payment can be made in cash, unlike other medical expenses or premiums which must be paid by a non-cash mode to qualify for deductions.
- The ₹5,000 deduction for preventive health check-ups is part of the total deduction limit of ₹25,000 or ₹50,000, depending on the age group of the taxpayer and their family members.
This provision encourages individuals to invest in their health and well-being while offering a tax benefit to help manage healthcare costs.
Example:
Karan has paid a health insurance premium of ₹21,000 for the health insurance of his wife and dependent children for the financial year 2023-24. Additionally, Karan has also had a preventive health check-up done for his father and paid ₹6,000 for the same.
Karan can claim a maximum deduction of ₹25,000 under Section 80D of the Income Tax Act. ₹21,000 will be allowed for the insurance premium paid, and ₹4,000 will be allowed for the preventive health check-up. The deduction for the preventive health check-up is limited to ₹4,000, as the total deduction cannot exceed ₹25,000 in this case. Therefore, Karan can claim a total deduction of ₹25,000.
Deduction of Medical Expenses for Senior Citizens (Section 80D)
Under Section 80D, if a senior citizen (aged 60 or above) does not have health insurance, the taxpayer can claim a deduction of up to ₹50,000 for the medical expenses incurred on their behalf. However, this deduction is not available if the senior citizen already has health insurance, and the taxpayer has made payments to keep it active.
Example:
If you have incurred ₹75,000 in medical expenses for your parents who are senior citizens, and they do not have health insurance, you can claim a deduction of up to ₹50,000 under Section 80D, even though the medical expenses exceed this amount. The remaining ₹25,000 would not be eligible for a deduction.
Multi-year Health Insurance Premium Paid in Lump-sum (Section 80D)
When individuals purchase multi-year health insurance plans and pay the premium upfront, they are allowed to claim the deduction proportionately over the policy’s duration. The total deduction will still be subject to the limits of ₹25,000 (for those below 60 years) or ₹50,000 (for senior citizens).
Example:
Mr. A buys a 2-year health insurance policy and pays ₹40,000 upfront. Since the policy is for two years, he can claim a deduction of ₹20,000 under Section 80D in each of the two years. The deduction is spread evenly across the policy term, with each year receiving a proportional amount of the premium paid.
How to Buy Medical Insurance
When purchasing health insurance, it’s essential to consider several factors to ensure the best coverage and to qualify for deductions under Section 80D. Here are the key points to keep in mind:
- Choose an Approved Scheme: Ensure that the health insurance plan is with an insurer registered and approved by the Insurance Regulatory and Development Authority (IRDA), or a scheme specified by the Central Government.
- Payment Mode: The premium payment must be made through any mode other than cash. This is important for claiming deductions under Section 80D. Additionally, it is helpful if the policy offers a cashless claim settlement process. Verify the list of network hospitals available in your area for cashless claims.
- Sufficient Sum Insured: Carefully select an adequate sum insured, as hospital room rent and other expenses are generally capped at a fixed percentage of the sum insured. Choosing the right sum insured ensures better coverage during hospitalization.
- Pre and Post-Hospitalization Expenses: Look for policies that cover expenses incurred before and after hospitalization. Many insurance plans cover pre-hospitalization expenses for up to 30 days and post-hospitalization expenses for up to 90 days.
- Alternative Therapies (AYUSH): Some policies cover alternative treatments such as Ayurveda, Yoga, Naturopathy, Unani, Siddha, and Homeopathy (AYUSH). If these therapies are important to you, ensure they are included in your policy.
- Additional Expenses and Daily Cash Limits: Consider policies that reimburse additional expenses such as lab tests or specialized doctor visits. Many policies provide daily cash allowances to cover such expenses, so it’s important to review the details of these cash limits.
- Yearly Health Check-ups: Many insurance companies offer free annual health check-ups as a benefit. These check-ups can be essential for the early detection of health issues and may include tests and evaluations.
- No-Claim Bonus: Some insurers offer a no-claim bonus, where your sum insured increases if no claims are made during the policy period. This provides extra security, although the bonus typically doesn’t affect expenses like hospital room rent.
- COVID Coverage: Post-pandemic, many insurers now include COVID coverage. Ensure that the policy covers COVID-related expenses, including the cost of hospitalization, PPE kits, and other related charges. Be clear about any limits on COVID-related claims.
By considering these factors, you can ensure that you choose the right medical insurance policy that meets your needs and allows you to maximize the deductions under Section 80D.
Points to Remember while Purchasing Medical Insurance for Claiming 80D Deductions
- Ineligible Relatives for Premium Deduction: Premiums paid for relatives such as a brother, sister, grandparents, aunts, uncles, or any other relatives cannot be claimed for tax benefits under Section 80D.
- Working Children: Premiums paid on behalf of working children are not eligible for tax deductions under Section 80D.
- Joint Payment: If both you and your parent(s) contribute towards the premium, each of you can claim the deduction proportionately for the amount paid by each.
- Service Tax and Cess Exclusion: When claiming deductions, do not include the service tax and cess portion of the premium. Only the base premium amount is eligible for the deduction.
- Group Health Insurance: Premiums paid for group health insurance provided by your employer are not eligible for deductions under Section 80D.
- Payment Mode: Premiums paid via any mode other than cash are eligible for deductions. This includes payments made via credit card, debit card, or online transfers.
By following these points, you can ensure that you are eligible to claim the maximum deduction under Section 80D.
Frequently Asked Questions
- What is the maximum deduction under Section 80D? The maximum deduction varies depending on the individuals or family members involved:
- Rs 25,000 for self, spouse, and dependent children (under 60 years)
- Rs 50,000 for self, spouse, dependent children, and parents (under 60 years)
- Rs 75,000 for self, spouse, dependent children, and parents (above 60 years)
- Rs 1,00,000 for self, spouse, dependent children, and parents (all above 60 years) Additionally, senior citizens can claim up to Rs 50,000 for medical expenses if they do not have insurance.
- Can I claim a deduction for medical expenses incurred for my parents during the financial year? Yes, if your parents are senior citizens (60 years or above) and do not have medical insurance, you can claim up to Rs 50,000 for medical expenses incurred on their behalf. Ensure the payment is made through a non-cash mode, and retain valid bills and receipts.
- What is the 80D deduction in income tax? Under Section 80D, taxpayers can claim deductions for premiums paid towards medical insurance for themselves, their spouse, parents, and dependent children. This deduction applies to individuals and Hindu Undivided Families (HUFs) and covers medical expenditures for senior citizens. The deduction limit depends on the taxpayer’s and their parent’s age.
- Which expenses are not allowed as deductions under Section 80D?
- Premiums paid in cash
- Premiums paid for working children, siblings, or any other relatives
- Group health insurance premiums paid by a company for its employees
- How to claim a deduction under Section 80D? If you’re salaried, you can claim the deduction by submitting receipts for insurance premiums or medical bills to your employer. Alternatively, you can claim the deduction while filing your income tax return (ITR).
- Who can claim an 80D deduction? Only individuals and HUFs (Hindu Undivided Families) are eligible to claim deductions under Section 80D. Resident senior citizens can claim the higher limit, while non-resident senior citizens are not eligible.
- What types of health insurance plans are eligible for deductions under Section 80D? Most health insurance plans, including individual health plans, family floater plans, and critical illness plans, qualify for deductions. Contributions made to the Central Government Health Scheme (CGHS) or other government-notified schemes are also eligible.
- Can I claim a deduction under Section 80D if I pay taxes under the new tax regime? No, if you opt for the new tax regime, you cannot claim deductions under Section 80D. However, if you choose to pay taxes under the old tax regime, you can claim the deduction.
- Can I claim a deduction under Section 80D if the employer reimburses the premium paid? No, if the employer reimburses the premium, it cannot be claimed as a deduction, as it will be considered an expense for the employer.
- What documents are needed for preventive health check-up tax deduction under Section 80D?
- For salaried individuals: Submit the health check-up invoice to your employer during the investment declaration.
- For self-employed individuals: No documents are required for claiming the deduction while filing the ITR, but it is advisable to keep the proof of payment/receipt in your tax records.
- Can I claim a deduction under Section 80D for medical treatment abroad? Yes, you can claim a deduction for medical expenses even if the treatment is received outside the country. There are no restrictions regarding this in the law.
- I have made contributions to CGHS. Am I eligible for deductions under Section 80D? Yes, you can claim up to Rs 25,000 for contributions made to the Central Government Health Scheme (CGHS) or any other notified health scheme. However, contributions made on behalf of parents are not eligible for this deduction.
- Can I claim Rs 75,000 under Section 80D? You can claim up to Rs 75,000 if you and your parents are senior citizens. Otherwise, the maximum deduction is Rs 50,000 for parents and Rs 25,000 for yourself.