Section 80D of Income Tax Act: Significance, Eligibility and Deductions

Tax Benefits Under Section 80D

Before getting into Section 80D details, find an honest answer to the question: how do you bear expenses on medical bills and regular check-ups? Dig into your savings and borrowing loans? If your answer is not included here, you surely made an intelligent decision buying a health insurance plan. 

Health insurance can protect your savings and safeguard you from the burden of loans. Other than that, while the tax season is around, you realize there's more to health insurance than just medical coverage. While safeguarding your well-being, it's also a valuable asset in your tax planning. The Government of India has introduced Section 80D of the Income Tax Act, 1961, offering you deductions and benefits that could significantly lighten your tax burden.

But what exactly does Section 80D entail? How can you maximize its benefits while ensuring comprehensive health coverage for yourself and your family? Reading this blog, learn key details of Section 80D, its deductions, benefits, and more to make informed decisions about your tax and investment planning. 

What is Section 80D of the Income Tax Act?

Section 80D of the Income Tax Act, 1961 allows individuals to claim tax benefits of up to Rs. 25,000 in a financial year. These deductions are available under health insurance plans and critical illness plans purchased for self, spouse, dependent children, and parents. For senior citizens aged 60 and above, the tax deduction limit under Section 80D increases to Rs. 50,000 annually. 

These tax deductions claimed under Section 80D are over and above the benefits Section 80C deduction limit. This means the taxpayers can claim extra Rs. 25,000/50,000 benefits in addition to the Rs. 1.5 Lakhs of deductions claimed. 

Who is Eligible for Section 80D Deduction?

Both individuals and Hindu Undivided Families (HUFs) can gain tax benefits under Section 80D. Other entities like corporations, partnerships, firms, and businesses cannot claim the deductions under this section of the Income Tax Act, 1961.

Which Deductions Are Allowed Under Section 80D?

An individual or HUFs can claim tax deductions for the following expenses under Section 80D of the IncomeTax Act, 1961:

• Health insurance premiums paid for self, spouse, children, and parents
• Medical expenses incurred for senior citizens (when they do not have individual health insurance)
• Payment made towards preventive health check-ups
• Contribution made to any government health insurance scheme

Section 80D: Tax Deductions on Medical Insurance and Expenses

• Self, Spouse & Children: Rs. 25,000
• Parents below 60 years: Rs. 25,000
• Parents above 60 years: Rs. 50,000
• Preventive Health Check-ups: Rs. 5,000
• For Disabled Dependent (40% <Disability>80%): Rs. 75,000
• For Disabled Dependent (Disability > 80%) : Rs. 1,25,000

For a better understanding, let’s look at the total tax deductions you can claim under Section 80D of the Income Tax Act, 1961 as of FY 2022-23. 

* The deduction of Rs. 5,000 for preventive health check-ups falls under the overall deduction limit of Rs. 25,000/ Rs. 50,000. The term ‘family’ includes only the spouse and dependent children.

What are Preventive Health Checkups Under Section 80D?

Preventive health checkups are generally frequent medical examinations conducted to identify the illness at the early stage and minimize the concerned risk factors. In 2013-14, the preventive health checkup deduction was introduced by the Government of India to encourage individuals to be more aware of their changing health conditions. 

You can enjoy the tax benefits on the preventive health check-up expenses for yourself, spouse, dependent children and parents. Under Section 80D of the Income Tax Act, a tax deduction of Rs. 5,000 per financial year is allowed towards preventive health check-ups within the overall limit of Rs. 25,000 for individuals and Rs. 50,000 for senior citizens. 

Let’s understand the tax deduction for preventive health check-ups with an example:

Ramesh wants to cover himself (38), his wife (35), his children (8 and 5), his father (67), and his mother (64) under health insurance. He pays Rs. 32,000 to buy a family floater health insurance plan and pays Rs. 55,000 for the medical insurance for his parents. Moreover, he pays Rs. 12,000 for the family health check-ups and Rs. 10,000 for his parents’ checkups.

Now, the maximum tax deduction under Section 80D can be availed in the following manner:

• Expenses for Self, Spouse, and Children:

Health premium insurance cost: Rs. 32,000 (maximum deduction applicable is Rs. 25,000)

Preventive health check-ups cost: Rs. 12,000 (maximum deduction applicable is Rs. 5,000)

Total expenses for family = Rs. 44,000 

→ Total deduction for family applicable under Section 80D= Rs. 25,000, including preventive health check-up deductions

• Expenses for Parents (Senior Citizens):

Health premium insurance cost: Rs. 55,000 (maximum deduction applicable is Rs. 50,000)

Preventive health check-ups cost: Rs. 10,000 (maximum deduction applicable is Rs. 5,000)

Total expenses for parents = Rs. 65,000 

→ Total deduction for parents applicable under Section 80D= Rs. 50,000, including preventive health check-up deductions

Hence, Ramesh can avail of a total annual deduction of Rs. 75,000 under Section 80D of the Income Tax Act. 

Section 80D Deductions for Senior Citizens

Under Section 80D, the medical expenses for senior citizens who do not have a health insurance policy issued are eligible to claim tax deductions of up to Rs. 50,000 per financial year. However, if a senior citizen already has health insurance issued, these deductions are not applicable. 

For example, Sharad spends Rs. 55,000 on his parents' medical expenses. He can avail of the tax deductions under the following conditions:

Case I: Parents do not have health insurance

Sharad can claim a tax deduction of Rs. 50,000 per financial year under Section 80D. 

Case II: Parents have health insurance issued (purchased by Sharad)

Sharad can claim a tax deduction of Rs. 50,000 per financial year under Section 80D. 

Case III: Parents have health insurance issued (paid by self)

Sharad cannot avail of any tax deduction, but parents can file for the same. 

How do Tax Savings Under Section 80D Work?

Let’s understand how an individual can save on taxes under Section 80D in different cases:

Case I: Suresh, a 45-year-old advisor, buys a health insurance policy to cover himself, his wife, and his children. He pays an annual premium of Rs. 19,000 towards the policy and spends Rs. 4,500 for his family's preventive health check-ups. 

This way, he can claim tax deductions of Rs. 19,000 + Rs. 4,500 = Rs. 23,500 in total under Section 80D. 

Case II: Jayesh, a 35-year-old, pays Rs. 15,000 annually for a health insurance policy premium. This health insurance covers his wife, himself, and his children. He also purchased health insurance for his parents (58 and 55 years respectively) and paid an annual premium of Rs. 20,000. In addition to that, he pays Rs. 5,000 for the annual preventive health check-ups.  

Hence, when filing for deductions, he can claim Rs. 15,000 + Rs. 20,000 + Rs. 5,000 = Rs. 40,000 in total under Section 80D. 

Case III: Ratan, a 48-year-old accountant, buys health insurance that covers him, his spouse, and his child. He pays a Rs. 29,000 annual premium towards the policy. In addition to that, he also pays Rs. 55,000 for the medical treatment of his parents, aged 78 and 73 (who are not covered under any health insurance). He spent Rs. 6,600 for the annual preventive health check-ups.

Now, under Section 80D limit, he can save on taxes of Rs. 25,000 + Rs. 50,000 = Rs. 75,000 in total. 

Payment Modes Allowed Under Section 80D 

The following modes of payment are available to avail of tax deductions under Section 80D. 

What’s Not Covered Under Section 80D?

While paying your premiums under a health insurance policy, there are certain key points that can prevent an individual from claiming tax deductions under Section 80D. These include the following: 

• The premiums paid in cash towards a health insurance policy are not eligible for tax deductions.
• Premiums paid towards the health insurance policies for siblings, grandparents, uncles, and aunts are not eligible for tax benefits under Section 80D. 
• The premiums paid towards group health insurance by an employer are not eligible for tax deductions under Section 80D. 
• The service tax and cess amount added to health insurance premiums are not included under the Section 80D deduction list. 

Section 80D Deductions for Multi-Year Health Insurance Policies

Instead of buying or renewing health insurance every year, many prefer buying multi-year health insurance to avail of a long-term policy discount offered by life insurers. In such conditions, an individual pays a lump sum premium and can avail of proportionate tax deductions under Section 80D of the Income Tax Act. 

For example, Madan pays a total of Rs. 60,000 when purchasing a 3-year health insurance policy. He can claim Rs. 20,000 per financial year as a tax deduction under Section 80D of the Income Tax Act, 1961. 

Other Benefits Under Section 80D

Section 80D of the Income Tax Act is further divided into subsections to maximize the tax deductions under different categories. Let’s have a look at them further so you can claim further tax deductions.

Deductions Under Section 80DD (Treatment of a Dependent with Disability)

Under Section 80DD of the Income Tax Act, an individual can claim a tax deduction of up to Rs. 75,000 per financial year on the medical expenses incurred on the cost of treatment of the dependent person with disability. Dependents can be either parents, siblings, children, or spouses. 

In case of a severe disability of 80% or more, an individual can claim a tax deduction of Rs. 1,25,000 per financial year. However, the taxpayer needs to submit a medical certificate of disability issued by the Medical Board of the Central or State Government while filing the income tax returns. 

Additionally, if an individual has purchased a LIC policy or a scheme from any other insurer to maintain the health of the dependent person with a disability, they can claim a tax deduction under Section 80DD. 

Deductions Under Section 80DDB (Treatment of Specified Illness)

In case of a specified illness or ailment diagnosed, an individual claims the tax deduction of up to Rs. 40,000 under Section 80DDB on the medical expenses incurred on the treatment of self, spouse, children, siblings, or parents. For the special illness treatment of senior citizens, one can claim a tax deduction of Rs. 1 Lakh per financial year.

Critical Illness Coverage Under Section 80D

Medical emergencies are uncertain, but being prepared for them may help you minimize the burden on your pocket. In case you do not have health insurance, you will bear the expenses in case you are diagnosed with cancer, stroke, or cardiac arrest. 

This is why people prefer adding a critical illness rider to stay financially secure when buying a life insurance policy. Premiums paid towards such riders are eligible for tax deduction under Section 80D of the Income Tax Act, 1961.

How to Claim Deduction under Section 80D?

Claiming the tax deductions under Section 80D of the Income Tax Act is quite simple if you have valid records of medical treatments, proof of preventive health check-ups, and receipts for paying insurance premiums. You can provide proof to your employer or claim the deductions directly while filing Income Tax Returns. 

Bottom Line

Reading it here, you must be clear on Section 80D tax deductions, 80D limits, and other benefits. As detailed above, you can claim the tax deductions under section 80D over and above the benefits claimed of Rs. 1.5 Lakhs under Section 80C of the Income Tax Act, 1961. 

Buying health insurance safeguards your finances and enables you to avail of hefty tax benefits for medical expenses incurred under self-insured or dependent senior citizens. 

For more details on the tax deduction limit under Section 80D, we suggest you get professional help from a tax advisor. 

* Disclaimer: The information provided here regarding insurance products, companies, and other schemes is for general informational purposes only and is subject to change according to the specific terms without prior notice.

Frequently Asked Questions on Section 80D

Who can claim deductions under Section 80D?

1. Individuals who have purchased a health insurance policy covering themselves, their family, and their parents can avail of tax deductions under Section 80D.

What is the Maximum Limit of Section 80D?

1. The maximum limit for claiming tax benefits under Section 80D is in the following manner:

• Medical expenses incurred for individuals and family: Rs. 25,000
• Medical expenses incurred for senior citizens: Rs. 50,000
• Preventive health check-ups for each: Rs. 5,000

Can we claim 80C and 80D both?

1. Yes, you can claim tax deduction under Sections 80C and 80D of the Income Tax Act. 

What is the maximum Section 80D deduction limit?

1. Individuals can claim a tax deduction of Rs. 25,000 every financial year under Section 80D. The tax deduction limit for parents below 60 years is Rs. 25,000. For senior citizens/ parents of 60 years or above, the limit of tax deduction is Rs. 50,000. 

Can I claim 80D and 80DD together?

1. You can claim deductions under Section 80D and Section 80DD together if they meet the required eligibility criteria. Remember that you can claim the expenses towards health insurance under Section 80D, while the expenses incurred for treating a disabled dependent can be claimed under Section 80DD. 

Can I claim an 80D deduction for my parents-in-law?

1. No, in-laws (dependent or not) are not included in the tax deduction under Section 80D. 

Can I avail of the tax deduction for my group health insurance policy?

1. No, you cannot avail of tax benefits under your group health insurance policy under Section 80D.

What is the difference between Section 80C and 80D?

1. Let’s understand the difference between Section 80C and 80D in the table below:

What types of health insurance plans are eligible for deductions under Section 80D?

1. The following health insurance plans are eligible for deductions under Section 80D:

• Individual health insurance (covers individuals)
• Family floater health insurance (covers self and family)
• Senior citizen health insurance (covers individuals 60 years or above)
• Critical Illness Insurance (coverage for specific illnesses and ailments)
• Preventive health check-up plans (coverage for preventive health check-ups)