Section 80D

Introduction

IRDAI, the Insurance Regulatory and Development Authority of India, has been making multiple efforts to boost insurance penetration across the country for quite some time. One such attempt is the tax benefits under Section 80D of the Income Tax Act, 1961, for health insurance policyholders. Well, if you are still on the fence about whether or not you should get a policy, here is one more incentive for you!

Read on to find a free tax deduction calculator under Section 80D for your health insurance policies, the deductions available based on your age, and more!

How Much Deduction Can Be Claimed Under Section 80D Based on Your Age?

The deduction limits under Section 80D vary based on age and whether you purchase insurance for your parents. Here are the maximum deductions permissible:

For senior citizens (aged 60 years and above) who do not possess health insurance, Section 80D allows a deduction of up to ₹50,000 for hospitalisation expenses incurred during the financial year. This provision ensures that elderly individuals without insurance or their children can still benefit from tax deductions on their hospitalisation expenditures.

Note: You can avail yourself of deductions under Section 80D of the Income Tax Act, 1961, only if you have opted for the old tax regime. You cannot claim this deduction if you choose the new tax regime under Section 115BAC of the Income Tax Act, 1961.

What is Section 80D?

Section 80D is a provision under the Income Tax Act that offers tax deductions on the premiums paid toward health insurance plans. The provisions are available irrespective of whether the included policyholders comprise you, your spouse, your dependent children or your parents. The cap on the deductions varies based on the age of the policyholders and can go up to a maximum of ₹1 lakh. Considering the rising premiums, it is an incredible incentive to encourage purchasing health insurance policies. Thus, this tax benefit directly translates to a financial perk.

What are the Benefits of Section 80D in Health Insurance?

Health insurance policies are no longer an option but a necessity against the backdrop of rising healthcare charges and higher insurance premiums. The tax benefits under Section 80D offer an affordability quotient that can act as a catalyst in motivating potential policyholders to avail of the best health insurance policies in the industry. Thanks to the perks under Section 80D, you can get a reduction in your taxable income up to ₹1 lakh.

Apart from discounts on health insurance premiums, the benefits under Section 80D also extend to coverage for costs incurred for preventive health check-ups (capped at ₹5,000). This encourages regular check-ups, which can act as preventive measures to diagnose any ailment as soon as possible.

Since senior citizens are more susceptible to ailments, there are higher risks of frequent hospitalisations. Thanks to this, health insurers view senior citizen profiles as riskier ones and hence -

• Demand higher premiums
• Add mandatory copayments

To counter this, the IRDAI has taken a proactive step by offering higher tax benefits under Section 80D on premiums for health insurance plans for senior citizens (up to ₹50k instead of ₹25k). This significant financial perk can motivate senior citizens to buy policies from top health insurance providers, regardless of the higher premiums.

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How do you claim the tax benefits under Section 80D?

Here is a step-by-step guide to claim deductions u/s 80D of the Income Tax Act of 1961:

Step 1: Understand Eligibility and Limits

To begin, assess your eligibility for deductions under Section 80D using the table and use cases above. Section 80D covers health insurance premiums for yourself, your spouse, dependent children, and your parents. It also includes medical expenses incurred for senior citizens without insurance. Ensure the premiums are paid through a non-cash medium, as this is mandatory. Be mindful of the deduction limits that we mentioned above.

Step 2: Collect Documentation

Gathering the necessary documentation is important. Ensure you have health insurance premium receipts and other necessary documents. These could be bank statements, credit card statements, policy documents or official receipts from the insurer or hospital.

If you are claiming deductions for preventive health check-ups, secure all bills related to these expenses. Senior citizens who do not have health insurance will need detailed medical expense bills to claim the deduction.

Step 3: Calculate the Total Deduction

Once you have your documents in order, calculate the total amount eligible for deduction. Feel free to use our calculator for an estimate of how much you can deduct. If you are claiming medical expenses for uninsured senior citizens, account for up to ₹50,000 under this category. Ensure that the total deductions claimed do not exceed the maximum permissible limit.

Step 4: File the Income Tax Return (ITR)

When filing your Income Tax Return (ITR), navigate to the section for deductions under Chapter VI-A. Look for the provision to enter deductions under Section 80D. Input the total eligible deduction amount calculated in the previous step. You may also need to provide details of the insured persons and how they’re related to you.

Once again, please note that the deduction under Section 80D of the Income Tax Act of 1961 is available only if you have chosen the old tax regime. If you have opted for the new tax regime, you are not eligible for this deduction.

Step 5: Documents for Future Reference

After filing, make sure to retain all documents related to your Section 80D claim for future reference. Keeping these records for at least 8 to 10 years is recommended, as the Income Tax Department may request them during audits or assessments. This includes receipts for premium payments, medical expense bills, and policy documents. Proper documentation ensures that your claim is valid and reduces the chances of disputes with the Income Tax Department.

Step 6: Cross-Verify After Submission

Once your return is submitted, take a moment to cross-verify the details. Check the acknowledgement to ensure accuracy in the deductions claimed. Double-check that the amounts you have claimed align with the supporting documents you have retained.

Who can benefit from the tax deductions under Section 80D?

1. Individual taxpayers: If any individual taxpayer has a health insurance policy that covers either

• Self,
• Self and Spouse, or
• Self and parents

2. Individuals paying for parents: If a taxpayer has purchased a health insurance policy for his/her parents and continues to pay for its premiums, he/she can claim a tax benefit under Section 80D. The cap on this tax benefit can vary from ₹25,000 to ₹50,000 based on whether the parents are under 60 (both) or above 60 (anyone or both) years old.

3. Hindu Undivided Families (HUF): HUFs can also claim deductions under Section 80D on premiums paid to insure any of their members.

4. Senior citizens: Individuals aged 60 years or above or those paying for health insurance plans can enjoy the tax benefits under Section 80D. The upper limit on the benefits for senior citizens is capped at ₹50,000, which perfectly aligns with the fact that people in their golden years require additional medical attention and are hence charged higher premiums.

5. Preventive health check-ups: Any taxpayer, regardless of their age, can claim up to ₹5,000 for their preventive health check-ups.

What are the exclusions for Section 80D?

1. Group health insurance plans: In the case of group health insurance policies, since the employer pays the premiums too (in a share with the insured), the tax benefits cannot be availed under Section 80D.

2. Cash payments of health insurance premiums: If you pay the health insurance premiums in cash instead of credit card, debit card, net banking, UPI, or demand draft, you won’t be able to enjoy the tax benefits under Section 80D. On the other hand, irrespective of your mode of payment, in the case of preventive health check-ups, you can avail of the tax benefits (capped at ₹5,000) under Section 80D.

3. Health insurance premiums for siblings/in-laws: If you pay the premiums for a health insurance plan for your family (parents, dependent child, and/or spouse), you can enjoy the tax benefits under Section 80D. However, if you pay the premiums for a plan that covers your siblings or in-laws, you can’t enjoy the perks of Section 80D.

4. Health insurance premiums for children above 25: If you pay the premiums for a health insurance policy that covers your child who is 25 years old or above (and not dependent), you can’t tap into the tax benefits offered under Section 80D for health insurance. This is because the insurer considers the child financially independent and capable of paying the premium themselves.

5. Health insurance premiums for NRIs: While NRIs can purchase health insurance plans in India (and should, if they have any plans to shift here or get medical treatments here), they can’t enjoy the tax benefits under Section 80D. The tax relief is crafted to help Indian citizens with the payment of health insurance premiums, and not non-residents of the country.

6. Non-Health-Related Add-Ons: When it comes to health insurance add-ons, if you have opted for Critical Illness Riders or Personal Accident Add-On (the latter isn’t recommended on a priority basis since standard health insurance plans cover personal accidents from Day 1), you can’t enjoy any deductions on the add-on premiums since they are not health-related.

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

While both Section 80D & 80C offer tax deductions, they cater to different financial instruments:

FAQs

In case you have a health insurance plan where you have paid the premiums upfront for more than 1 year, the tax deductions under Section 80D are spread out -

• Pro-Rata-Based deductions: The total premium paid upfront is divided by the policy's tenure. Then, you can claim the deductions for the annual premiums calculated each year.
• Limit on the annual deductions: The pro-rata-based health insurance premiums must fall under the capped amount under Section 80D (₹25,000 where the insured is under 60 years old and ₹50,000 where the insured is above 60).
• Miscellaneous perks: Apart from the benefits obtained under Section 80D, the renewal span is smooth and convenient for multi-year health insurance premium payments. Additionally, since you are paying more than 1 year’s worth of premiums in one go, insurers are most likely to offer a discount on the amount. So, you will be paying a lower premium and enjoying the tax benefits via deductions in premiums.

No, there are no special benefits offered under Section 80D for people with disability. However, one can look into Sections 80DD and 80U for a few similar perks -

• Under Section 80DD, in the case of a dependent with a disability, an individual (taxpayer) can claim up to ₹75,000 or ₹1,50,000 in the case of individuals with severe disabilities.
• Under Section 80DD, the benefits extend to expenses incurred on dependents, including spouses, children, parents, or siblings with disabilities (provided the individuals offer their certificate of disability).
• Under Section 80U, taxpayers with disabilities can claim tax deductions up to ₹75,000 or up to ₹1,50,000 in the case of severe disabilities.

No, there are no special perks for people with specific illnesses and/or critical ailments under Section 80D. However, in this case, the benefits under Section 80DDB can be applicable -

• Under this Section, the taxpayers can claim benefits incurred in treating specific/critical illnesses like cancer, chronic kidney disease, and certain neurological disorders.
• The deductions under Section 80DDB are capped at ₹40,000 for individuals below 60 and at ₹1,00,000 for those above 60.
• Provided the intended individual submits a prescription or certificate from a specialist in a government hospital or a qualified medical practitioner, the taxpayer, their spouse, children, parents, or siblings can take advantage of the deduction perks under Section 80DDB.
• If the medical expenses have been reimbursed by a health insurance provider or by the employer in question, the tax benefits will be offered only for the residual amount paid out of the taxpayer's pocket.