In 2022-2023, it is estimated that out of the 77 million Indians who filed their ITR, only 20 million paid taxes. This can be attributed to how our tax structure is built—the Indian Tax Code has numerous provisions for its citizens to save on taxes every year.

There’s the infamous Section 80C that has an exemption of up to ₹ 1.5 lakhs for purchasing term-life insurance, investing in certain schemes and funds; 80G for donations to funds & trusts; 80E for the interest you pay on your education loan, etc.

These deductions are part of Section 80 of the Income Tax Act of 1961, which regulates taxpayer deductions.

Today, let’s explore in detail Section 80D, especially if your parents are senior citizens.

What is Section 80D of the Income Tax Act?

Section 80D is a provision that allows you to reduce the amount paid for health insurance from your total taxable income. This reduces your tax liability and protects you from huge medical bills if you’re ever hospitalised.

Another advantage is that if you had paid for your spouse, kids’ and parents’ premiums, you can deduct that, too!

But you can’t reduce the entire amount—there are certain restrictions, limitations, and clauses, and the amount you can deduct varies depending on numerous factors.

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How is your 80D Deduction Calculated?

The amount of deduction differs from person to person, but the limit is the same no matter what.

If you are below 60, the maximum deduction under Section 80D is ₹25,000 for yourself (including spouse and dependent children). You can claim an additional ₹25k if your parents are below 60. If at least one of your parents is over 60, it increases to ₹50k.

If you and your parents are older than 60, you can claim ₹ 50k for each – i.e. a total deduction of ₹ 1 lakh.

There’s also an up to ₹ 5 thousand deduction for preventive health check-ups. But this is not in addition to the above limit.

Let’s understand this with a few common cases –

Different Cases

  • Two policies - Family floater for self (<60) and family floater for parents (< 60)

When opting for a family floater covering yourself and your parents, both under the age of 60, you can claim a deduction of ₹ 25 thousand for yourself, your spouse, and dependent children, and an additional ₹ 25 thousand deduction for premiums paid for your parents.

  • One policy - Family floater for self (<60) + parents

In the case of a family floater where you have included a parent aged above 60, the insurer will provide a breakdown of premiums for each insured individual. If your parents are below 60, you'll receive a ₹ 25 thousand deduction for their premiums, but if they're above 60, you can claim a ₹ 50 thousand deduction for them.

However, if you don’t get the premium split from your insurer and try to claim the deduction, you can claim only a ₹ 25k deduction under the ‘self’ heading.

Optima Secure, for example, provides the premiums separately for parents and self (including spouse and children) by default. In case your insurer does not, feel free to request them for the same.

  • One policy - Floater for parents alone

If you opt for a floater policy exclusively for your parents, and at least one of them is over 60 years old, you can claim a deduction of ₹ 50k for the premiums paid. If both parents are below 60, the deduction is ₹ 25k.

  • If you take separate policies for your parents (one above 60 and one below 60)

Opting for separate policies for your parents allows you to claim a total deduction of ₹ 50k for the premiums paid for their health insurance if at least one of them is > 60 years old.

  • If you and your parents are > 60 years old

If you and your parents are over 60 years old, you can claim a deduction of up to ₹ 50k for yourself and ₹ 50k for your parents.

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What is the significance of health insurance for senior citizens?

The global economy faced its worst during the pandemic. None of the industries were prepared for a disaster of this magnitude. However, the worst nightmare came in for the healthcare sector. Medical inflation started growing in leaps and bounds. While this is a huge concern for all because of how one can meet their medical expenses, for those in their retirement years, such expenditures are an unbearable burden to bear.

For such senior citizens, plans from the best health insurance providers are a life-saver. The frequent hospitalisations and high chances of health complications guarantee high hospital bills, which are difficult to meet over pensions and secondary sources of income that barely help them run their daily expenses.

With the best health insurance plans for parents and senior citizens that are comprehensive and offer coverage for a majority of health conditions, policyholders don’t have to worry about spending significantly from their savings during times of medical emergencies (add to this the mental peace that one gets since they don’t have to worry about bill payment, especially if the mode of payment is cashless).

Additionally, considering the financial challenges that retired individuals face, the IRDAI and health insurers have offered additional benefits in the form of boosted capped tax deductions under Section 80D.

Best Policies for Senior Citizens in India

  • Aditya Birla Activ One: Activ One is one of the latest offerings of Aditya Birla and it clears up most of the shortcomings of its previous policies. For starters, it has no upper age limit for entry and no co-payment, making it perfect for senior citizens and elderly people. The cover amount starts at ₹ 2 lakhs and goes all the way up to ₹ 6 crore AND you get a 2X cover from Day 1, just like Optima Secure. However, one of the few downsides is that despite having the option for so much coverage, you don’t get the option for international coverage.
  • Care Supreme: One of the top policies offered by Care Insurance, Care Supreme has industry-best features such as no co-payment, room rent restriction, and disease-wise sub-limits. It also offers domiciliary and day-care coverage while being one of the most affordable policies in the market. However, one of the few downsides is its 4-year pre-existing disease waiting period. As an insurer, Care has a network of 9,400+ hospitals, with a claim settlement ratio of 90.75% (Average of the last 3 years).
  • Niva Bupa Health Companion: While Niva Bupa has a CSR of 90.66%, with 9,100+ network hospitals, which might sound similar to Care, the policy is slightly better in some ways and worse in some. Niva Bupa Health Companion offers the same no-copayment, no room rent restriction and no disease-wise sub-limit. It has a lower pre-existing disease waiting period of 3 years and also offers a yearly health check-up. However, it has a no-claim bonus of only 20% per year (up to 100%) and a 100% restoration once a year.

Things to keep in mind while claiming a deduction u/s 80D

  • If you want to claim a deduction for both yourself and your parents, always ask your insurer for the breakup of the premium paid. This will ensure that you get the maximum deduction under both categories.
  • You can avail a deduction only if you have paid your premiums in any mode other than cash.
  • You can also claim a deduction of up to ₹ 5 thousand for preventive health checkups. This amount is not separate and is included in the deduction for premiums. So, if you’re under 60 years old, you have a premium of ₹ 25 thousand, and you want to claim this additional amount, you cannot.
  • If you do not have a policy for your parents older than 60, you can still claim deductions up to ₹ 50 thousand for medical expenses incurred for them. The only catch is that you shouldn’t pay in cash. This section acknowledges the financial burden of healthcare for the elderly and offers relief through this deduction.

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Conclusion

Various sections under the Indian Income Tax Act of 1961 provide tax relief to the salaried class. One such section is 80D, which offers significant tax-saving opportunities if you buy a health insurance policy for you and your family, especially if you have senior citizen parents. You get a deduction of ₹ 25k for yourself, your spouse and dependent children, and an additional ₹ 25k or ₹ 50k for your parents. Taxpayers can also claim deductions up to ₹ 50 thousand for medical expenses incurred for senior citizen parents who do not have a health insurance policy.

Several good health insurance policies for senior citizens are available in the market. While not all of them may be affordable, having options is always good, right?

Even though you may have gotten a fair understanding of Section 80D through this article, please consult a tax professional before filing your taxes.