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Section 80D of income tax act: Deductions, eligibility and benefits

Learn how to maximise the tax benefits and savings using health or medical insurance under section 80D of the Income Tax Act

Published: Jul 8, 2024 06:10:03 PM IST
Updated: Jul 12, 2024 12:29:28 PM IST

Healthcare systems and infrastructure have grown tremendously over the past few decades, offering society some of the best care in human history. Financial planning plays a significant role in individuals and family members in the developing world. Medical expenses can be daunting and often disrupt savings and long-term financial goals. Therefore, health and medical insurance coverage must be a vital part of financial practices to unburden the load of sudden expenses.

Premium health insurance and medical plans usually cover hospital charges, surgeries, medications, and preventive care. They also provide financial aid when an individual needs it the most, such as during unexpected medical emergencies in the family. They are the best backup plans to ensure all medical procedures and treatments are accessible without severe setbacks or emptying your savings.

Also Read: Section 80C: Income tax deduction and limits under section 80C, 80CCD in 2024

The need for Section 80D

The Government of India implemented section 80D, urging people to invest in health insurance policies by providing several added benefits to the premium holder. Their main aim was to encourage people to supervise their health by diagnosing and preventing illnesses before they worsen. Any eligible individual or taxpayer can claim health or medical insurance benefits based on the policy's guidelines.

Section 80D and its importance

Section 80D of the Income Tax Act of 1961 allows taxpayers to claim deductions for the premiums paid on health or medical insurance policies. The section is implemented to urge people to invest in health insurance to ensure financial support during medical emergencies while offering tax benefits.

Taxpayers can claim deductions under section 80D for health or medical insurance premiums for their children, spouse, parents, and themselves at any time. The section provides financial assistance during a medical crisis and reduces taxable income. The deduction range varies depending on the insured member's premium details and age.

Also Read: ITR filing: How to switch between old and new tax regimes

The benefits of section 80D implementation include:

  1. Tax deductions on health and medical insurance policies
  2. Promotes the importance of overall well-being and health
  3. Aids financial support during medical emergencies
  4. Encourages long-term financial planning and strategies
  5. Tax benefits extend to the entire family members under the health insurance plan

Section 80D also covers preventive health checkups and diagnosis tests up to ₹5000 (cash payment) within the overall limit. Taxpayers or individuals can claim a deduction of up to ₹25,000 annually for themselves, their spouse, and their children.

By understanding the details of section 80D, individuals and taxpayers can financially plan their health insurance coverage better, optimise their tax savings and lower their overall tax liability.

Eligibility criteria for deduction section 80D

For appropriate tax deduction under section 80D, an individual must meet the following eligibility criteria.

  • Individuals
  • Hindu Undivided Families (HUFs)

Age and total income

There is no specific age limit for gaining tax deductions. However, the person must be a resident of India and must have a total taxable income, as per the Income Tax Act. NRIs who pay taxes in India can also claim maximum tax deductions of ₹25,000, provided they comply with Indian tax regulations.

Medical expenditures

The deduction can be claimed for medical insurance premiums for self, parents, or family (spouse and children).

Senior citizens

Individuals 60 years or above can claim a total deduction of ₹50,000 annually.

Also Read: Income tax slabs for senior and super senior citizens (new and old tax regimes) for AY 2024-25

Proof of expenses

Individuals must maintain valid proof of all medical expenses and health insurance policies while claiming tax deductions.

Deduction limit

The maximum deduction under Section 80D is ₹50,000 annually. The total includes ₹25,000 for medical expenses, and the remainder for health insurance premiums provided the insurance is paid in any mode other than cash.

No companies, firms, or enterprises can claim for deductions under this section. Any person, whether an individual or a member of an HUF, is eligible to claim tax-saving benefits.

Also Read: Health insurance companies and claim settlement ratio

Preventive health check-up under Section 80D

The Government of India introduced preventative health check-up deductions in 2013-14, following the Income Tax Act 1961 guidelines. This inclusion aimed to prevent the onset or worsening of the medical condition in people. The tax deduction in preventive check-ups encourages individuals to take a proactive approach towards upholding good health. Under section 80D, individuals or taxpayers can plead a deduction of up to ₹5,000 on preventive health checkups and tests. Individuals can avail themselves, their families (spouse and children), or parents of this tax deduction benefit. Such checkups can be paid in cash but with valid proof.

Section 80D limit for health checkups

The deduction for preventive health check-ups falls under Section 80D, which allows deductions up to ₹25,000 for individuals and ₹50,000 for senior citizens. This total limit includes premiums paid towards health insurance policies and expenses on preventive health check-ups.

Deduction frequency

Individuals or taxpayers can claim preventive health checkup deductions every financial year. Regular checkups help maintain overall well-being, prevent potential illness, and make informed lifestyle choices.

Approved medical facilities

To be eligible for tax deductions under section 80D, one must undergo a checkup at government-recognised hospitals, medical institutions, or healthcare providers. This criteria also ensures that the screening meets the safety standards and is eligible for tax benefits under the Income Tax Act.

Deductions under Section 80D

Here are the monetary details and the deduction amounts in table format to help us understand them better.

*(Family = spouse and dependent children)

Who is the Policy for? Tax deduction for individuals and families (in ₹) Tax Deduction for parents (in ₹) Preventive health checkups annually (in ₹) Maximum Tax deduction (in ₹)
Individuals and family (below 60 years) 25,000 5,000 25,000
Individuals, family, and parents (all below 60 years) 25,000 25,000 5,000 50,000
Individual and family (below 60 years) + parents (above 60 years) 25,000 50,000 5,000 75,000
Individual, family and parents (all above 60 years) 50,000 50,000 5,000 1,00,000
HUF members (below 60 years) 25,000 25,000 5,000 25,000
HUF members (one member above 60 years) 50,000 50,000 5,000 50,000

Eligible mode Of payment under Section 80D

Individuals or taxpayers claiming a tax deduction under section 80D must make their respective payments in any mode other than cash. These include debit or credit cards, UPIs, and cheques. However, only preventive health checkups can be made in cash. Any premium payment made in cash will not be accepted for the tax deduction.