A Detailed Guide of Deductions under Section 80D

The Section 80D deduction applies to the premiums paid towards health insurance for self and family members. The biggest advantage for the taxpayer is that they can claim deduction u/s 80D along with the deduction claimed under Section 80C/CCC/CCD.

What is Section 80D?

Every individual or HUF who has purchased medical insurance can claim for a tax deduction under Section 80D of Income Tax Act, 1961. The taxpayer can avail tax benefits on insurance taken for self, spouse, dependent children and parents.

The Section 80D deduction applies to the premiums paid towards health insurance for self and family members. The biggest advantage for the taxpayer is that they can claim deduction u/s 80D along with the deduction claimed under Section 80C/CCC/CCD.

Tax deductions under Section 80D

The tax deductions can be claimed only towards the premium paid for medical insurance. The amount qualifying for deductions are as mentioned below:

  • For individual and family
    • An individual can claim a maximum tax deduction of ₹25,000 every year on the premium paid on their medical insurance and their family’s.
    • A senior citizen can claim a maximum tax deduction of ₹50,000 every year on the premium paid towards medical insurance.
  • For parents
    • An individual can claim a maximum tax deduction of ₹25,000 every year on payment of health insurance premiums for their parents.
    • An individual can claim a maximum tax deduction of ₹50,000 every year on payment of health insurance premiums for parents who are senior citizens.
  • Additional deductions 

An individual can claim a maximum deduction of ₹5000 every year as expenses on health check-ups. The Section 80D medical expenditure applies to self, spouse, dependent children and parents.

Eligibility conditions for tax exemption as per Section 80D

The individual can claim relaxation in taxation under Section 80D on health or medical insurance purchases made for immediate family members, which includes:

  • Self
  • Spouse
  • Dependent children
  • Parents

HUF or Hindu Undivided Family can also seek deductions under Section 80D. Premium payments towards health insurance of any family member in the HUF is eligible for deduction in taxes, subject to the tax limit.

Section 80D deduction limit

Depending on their family structure, an individual can enjoy different limits of tax exemptions applicable to health insurance policies taken for self and family members, including parents. Let us understand the overall Section 80 deduction limit with the help of the following table:

Members coveredTax exemption limitExemption on health check-upTotal
Individual and family₹25,000₹5000₹25,000
Individual, family and parents₹(25,000 + 25,000) = ₹50,000₹5000₹55,000
Individual, family and senior citizen parents₹(25,000 + 50,000) = ₹75,000₹5000₹80,000
Senior citizen individual, family and senior citizen parents₹(50,000 + 50,000) = ₹1,00,000₹5000₹1.05 lakhs

Example of Section 80D limit

Suppose the taxpayer is 40 years old, and his parents are senior citizens. He is paying a premium of ₹35,000 for family health insurance. He has taken a separate health insurance policy for his senior citizen parents, for which he is paying a premium of ₹40,000. So, the maximum amount that the individual can claim in deductions will be:

For self

  • Actual premium paid for self and family is ₹ 35,000
  • The maximum deduction limit for self and family is ₹ 25,000
  • So, the amount eligible for deductions is ₹ 25,000

For parents

  • The actual amount paid for senior citizen parents is ₹ 40,000
  • The maximum deduction limit for senior citizen parents is ₹ 50,000
  • So, the amount eligible for deduction is ₹ 40,000

Thus, the individual can claim a total deduction of ₹65,000 for the given financial year.

Section 80D exclusions

The tax exemptions for Section 80D may not be applicable under the following cases:

  • Mode of Payment: Only the taxpayer should make the premium payments for health insurance to become eligible for the tax exemptions under the Section 80D. Third-party payments do not qualify for tax deductions. Plus, cash mode of payment is not applicable for claiming deductions under Section 80D. However, the taxpayer can avail for tax exemption on cash payments done towards preventive health check-ups.
  • Service Tax: A service tax of 14% is levied on health insurance premium payments. However, the taxpayer is not eligible to avail exemptions on service tax and cess applicable to the insurance premium payment.
  • Group Health Insurance: A group health insurance does not qualify the taxpayer to get tax benefits as per Section 80D. Although, if the taxpayer plans to make extra payments to increase their group cover value, then the individual can claim tax deductions on the additional amount.

Frequently Asked Questions

  1. Can the individual claim deductions if their spouse or parents are not dependent on them?
    Yes. The individual can claim tax deductions even if their spouse and children are not dependent on the individual.
  2. Can the individual claim deduction on insurance payments made for children who are employed?
    No. The individual can only claim the exemption on insurance premium payments done for dependent children.
  3. If the individual pays premiums via cash, can they claim deductions under Section 80D?
    No. If the individual makes the premium payment through cash, then they are not eligible to claim any tax deductions under Section 80D.
  4. Can the taxpayer avail benefits if they have two health insurance policies?
    The taxpayer can avail tax deductions on two insurance policies provided they meet the required eligibility conditions, and the individual regularly pays the premiums on these insurance policies.
  5. Can the individual avail for tax exemption under Section 80D if they have already availed tax benefits under relevant sections of Section 80C?
    Yes. The individual can claim tax deductions under Section 80D over and above those made on Section 80C.Health insurance is an excellent tax savings instrument that every taxpayer can benefit from an added bonus to the coverage they receive. It is important to note that the individual can claim tax deductions under Section 80D over and above those claimed under different sections under Section 80C. This enhances the tax exemption limit for taxpayers.

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Subin
Subin

One of the prime contributors for this blog. I have 5 years of experience in SEO, Digital Marketing, Content Marketing, and have knowledge in topics like Tax, HR, Recruitment & Staffing. A free-spirit with a passion for travelling & music.

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