Section 80D of Income Tax Act: Deductions Under Medical Insurance, Limit, Eligibility And Policies

Health insurance provides coverage for unforeseen medical costs and hospital bills when you most require it. Health insurance is one of the best ways to overcome such financial crises. 

In India, most people don't have health insurance and rely on their own savings or borrow money when they have medical emergencies. To encourage people to purchase health insurance policies, the government introduced tax benefits on medical insurance under Section 80D.

What is Section 80D?

Every individual or HUF can claim a deduction for medical insurance premiums paid in the financial year under Section 80D. This deduction is also available for top-up health plans and critical illness plans.

The best part is that it is over and above the Rs 1.5 lakh limit deductions claimed under Section 80C.

Note: This deduction can be claimed if an individual or HUF chooses to pay taxes under the old tax regime.

Who is Eligible for Deduction Under Section 80D? 

• Individuals
• Hindu Undivided Family (HUFs)

No other entity can claim this deduction. For example, a company or a firm cannot claim a deduction under this section.

What Deduction is Allowed Under Section 80D?

The following expenses are allowed as deduction under Section 80D:

• Medical insurance premiums paid for self, family and parents
• Medical expenses incurred for senior citizens

Individual or HUF taxpayers can claim deduction for the insurance premium payments made for:

• Self 
• Spouse 
• Dependent children 
• Parents

Payments Eligible as Deduction Under Section 80D

An individual or HUF can claim a deduction under Section 80D for the payments mentioned below:

• Health insurance premiums paid in any mode other than cash:
  • Up to ₹25,000 paid for self, spouse, dependent children or parents
  • Up to ₹50,000 if family or your parents are senior citizens (60 years and above) 
    
    
• Preventive health checkups (Cash payment allowed):
  • Up to ₹5,000 for self, spouse, dependent children or parents  
     
• Medical expenses
  • Senior citizens (resident aged 60 years or above) who do not have any health insurance can claim a deduction up to Rs 50,000 on the medical expenses incurred.  
    Note: While the Income Tax Act doesn't explicitly define "medical expenditure," it typically means costs like medical consultations, impairment aids, medicines, etc. 
     
• Contribution to CGHS/notified scheme
  • Individuals can claim a tax deduction of up to ₹25,000 for contributions made to the Central Government Health Scheme (CGHS) or any other notified scheme. However, any contribution made on behalf of parents is not eligible for this deduction.

Deduction Available Under Section 80D

The deduction allowed under Section 80D is Rs 25,000 in a financial year. In the case of senior citizens, the deduction limit allowed is Rs 50,000.

The table below captures the amount of deduction available to an individual taxpayer under various scenarios:

*The deduction for preventive check-up of up to Rs 5,000 will be within the overall limit of Rs 25,000/50,000. Please note that 'family' under this section includes only the spouse and dependent children.

Example: 

Rohan is aged 45 years, and his father is aged 75 years. Rohan has taken medical cover for himself and his father, for which he pays insurance premiums of Rs 30,000 and Rs 35,000, respectively. What would be the maximum amount he can claim by way of a deduction under Section 80D? 

Answer: 

Rohan can claim up to Rs 25,000 for the premium paid on his policy. As for the policy taken for his father, a senior citizen, Rohan can claim up to Rs 50,000. In the given case, the deduction allowed is Rs 25,000 and Rs 35,000. Therefore, the total deduction he can claim for the year is Rs 60,000.

Mode of Payment Under Section 80D

For claiming such deduction under section 80D, the payment has to be made in the specified mode:

What is a Preventive Health Check-up Under Section 80D?

The government introduced preventive health check-up deduction in 2013-14 to encourage citizens to be more proactive towards health. Preventive health check-ups aim to identify any illness and mitigate risk factors at an early stage through frequent health check-ups.

Section 80D includes a deduction of Rs 5,000 for any payments made towards preventive health check-ups. This deduction will be within the overall limit of Rs 25,000/Rs 50,000, as the case may be.

This deduction can also be claimed by the individual for himself, his spouse, dependent children, or parents. The payment for preventive health check-ups can be made in cash.

For Example: 
Rahul has paid a health insurance premium of Rs 23,000 for the health insurance of his wife and dependent children in the financial year 2023-24. He also had a health check-up done for himself and has paid Rs 5,000.

Rahul can claim a maximum deduction of Rs 25,000 under Section 80D of the Income Tax Act. Rs 23,000 has been allowed towards the insurance premium paid, and Rs 2,000 has been allowed for a health check-up. The deduction towards preventive health check-ups has been restricted to Rs 2,000 as the overall deduction cannot exceed Rs 25,000 in this case.

Deduction of Medical Expenses for Senior Citizens (Section 80D)

For the welfare of senior citizens (Resident + aged 60 or above) who don't have health insurance, a deduction up to Rs. 50,000 can be claimed on the medical expenses incurred for them. However, if they already have health insurance and have made payments to keep it active, they won't be eligible for this deduction. 
Example: If you incurred Rs 65,000 for the medical expenses of your parents who are senior citizens, you may claim Rs 50,000 as deduction although they don't have a health insurance policy.

Multi-year Health Insurance Premium Paid in Lump-sum (Section 80D)

Sometimes, people buy multi-year health insurance plans because of the discounts offered. For this they pay the premium amount upfront for all the years. In this case, deduction is allowed proportionately under section 80D. However, this would again be subject to the limits of Rs 25,000 of Rs 50,000 as discussed above. 
Example: Mr. A bought 2-year health insurance policy and paid Rs 30,000 upfront. In this case, Mr. A can claim Rs 15,000 as deduction under Section 80D in each of the two years. 

How to Buy Medical Insurance?

There are many factors to be considered before purchasing health insurance. Here are some points to be considered from the standpoint of claiming a deduction under Section 80D and other general clauses before buying any medical insurance:

• Contribution towards health insurance should be made to schemes specified by the Central Government or any other insurer and approved by IRDA, i.e. Insurance Regulatory and Development Authority.
• Please ensure that insurance premium payment is made by any mode other than cash. Also, it will be very convenient if the policy offers a cashless claim settlement process with sufficient network hospitals covered in your city. One should check the list of the network hospitals which have tie-up with your insurer for processing cashless claims.
• Hospital room rent and other expenditures are allowed on a fixed percentage of the sum insured. Hence, choosing a sufficient sum insured is important before purchasing health insurance.
• Please carefully consider the clause relating to pre and post-hospitalisation expenses. Many policies cover all the expenses incurred before 30 days and after 90 days of hospitalisation.
• Many insurance providers have started including alternative therapies like Ayurveda, Yoga, Naturopathy, Unani, Siddha and Homeopathy (abbreviated as AYUSH). This can be important to many and should be duly considered.
• Many other expenses get incurred, like lab tests, specialised doctor's visits, etc. Many policies now provide daily cash limits as reimbursement for such additional expenses. Check the details of the daily cash limit offered, as this help to meet the extra expenses which are not otherwise covered for settlement of the claim.
• Many insurance companies provide yearly health check-ups as added benefits. Health check-ups include various tests and health evaluation, which is essential and helpful in the early diagnosis of any illness.
• Please consider the clause of a no-claim guaranteed bonus every year. Many insurance providers offer a no-claim bonus added to your sum insured for all those years for which the policyholder made no claim. This increases the sum that can be claimed, giving additional security. However, it should be noted that all allowed expenditures, like the choice of hospital room, are linked to the original sum assured, excluding the no-claim bonus.
• Post-pandemic, most of the insurance providers are offering COVID coverage. However, details like coverage of COVID, the cap on expenses, daily cash benefits, and miscellaneous charges like PPE kits, if covered or not, should be known before purchasing the insurance. Read more.

Points to Remember while Purchasing Medical Insurance for Claiming 80D Deductions

• A medical insurance premium paid for a brother, sister, grandparents, aunts, uncles or any other relative cannot be claimed as a deduction for taking tax benefits.
• Premium paid on behalf of working children cannot be taken for tax benefit.
• In the case of part payment by you and a parent, both of you can claim a deduction to the extent paid by each.
• The deduction must be taken without showing the service tax and cess portion from the premium amount.
• Group health insurance premium provided by the company is not eligible for deduction.
• Premium paid by any mode other than cash is allowed for deduction. Hence premium paid by credit card or other online mode is also allowed for deduction.

Related Articles: 
Who can claim a deduction under section 80DD? 
Income Tax Deductions List 
Section 80DDB of Income Tax Act 
Section 24 - Deductions From House Property Income 
Section 80G
Section 80EE - Deduction for Interest on Home Loan
Section 80CCD - Deductions under NPS & APY
Section 80TTB - Deduction for Senior Citizens
Section 80TTA  - Deduction on Interest
Section 80GG - Deductions for Rent Paid
Section 80U – Tax Deduction for Disabled Individuals