Section 80D of Income Tax Act: Significance, Eligibility and Deductions

Before getting into Section 80D details, find an honest answer to the question: how do you bear expenses on medical bills and regular check-ups? Dig into your savings and borrowing loans? If your answer is not included here, you surely made an intelligent decision buying a health insurance plan.

Tax Benefits Under Section 80D

Health insurance can protect your savings and safeguard you from the burden of loans. Other than that, while the tax season is around, you realize there's more to health insurance than just medical coverage. While safeguarding your well-being, it's also a valuable asset in your tax planning. The Government of India has introduced Section 80D of the Income Tax Act, 1961, offering you deductions and benefits that could significantly lighten your tax burden.

But what exactly does Section 80D entail? How can you maximize its benefits while ensuring comprehensive health coverage for yourself and your family? Reading this blog, learn key details of Section 80D, its deductions, benefits, and more to make informed decisions about your tax and investment planning.

What is Section 80D of the Income Tax Act?

Section 80D of the Income Tax Act, 1961 allows individuals to claim tax benefits of up to Rs. 25,000 in a financial year. These deductions are available under health insurance plans and critical illness plans purchased for self, spouse, dependent children, and parents. For senior citizens aged 60 and above, the tax deduction limit under Section 80D increases to Rs. 50,000 annually.

These tax deductions claimed under Section 80D are over and above the benefits Section 80C deduction limit. This means the taxpayers can claim extra Rs. 25,000/50,000 benefits in addition to the Rs. 1.5 Lakhs of deductions claimed.

Who is Eligible for Section 80D Deduction?

Both individuals and Hindu Undivided Families (HUFs) can gain tax benefits under Section 80D. Other entities like corporations, partnerships, firms, and businesses cannot claim the deductions under this section of the Income Tax Act, 1961.

Which Deductions Are Allowed Under Section 80D?

An individual or HUFs can claim tax deductions for the following expenses under Section 80D of the IncomeTax Act, 1961:

Section 80D: Tax Deductions on Medical Insurance and Expenses

• Self, Spouse & Children: Rs. 25,000
• Parents below 60 years: Rs. 25,000
• Parents above 60 years: Rs. 50,000
• Preventive Health Check-ups: Rs. 5,000
• For Disabled Dependent (40% 80%): Rs. 75,000
• For Disabled Dependent (Disability > 80%) : Rs. 1,25,000

For a better understanding, let’s look at the total tax deductions you can claim under Section 80D of the Income Tax Act, 1961 as of FY 2022-23.

* The deduction of Rs. 5,000 for preventive health check-ups falls under the overall deduction limit of Rs. 25,000/ Rs. 50,000. The term ‘family’ includes only the spouse and dependent children.

What are Preventive Health Checkups Under Section 80D?

Preventive health checkups are generally frequent medical examinations conducted to identify the illness at the early stage and minimize the concerned risk factors. In 2013-14, the preventive health checkup deduction was introduced by the Government of India to encourage individuals to be more aware of their changing health conditions.

You can enjoy the tax benefits on the preventive health check-up expenses for yourself, spouse, dependent children and parents. Under Section 80D of the Income Tax Act, a tax deduction of Rs. 5,000 per financial year is allowed towards preventive health check-ups within the overall limit of Rs. 25,000 for individuals and Rs. 50,000 for senior citizens.

Let’s understand the tax deduction for preventive health check-ups with an example:

Ramesh wants to cover himself (38), his wife (35), his children (8 and 5), his father (67), and his mother (64) under health insurance. He pays Rs. 32,000 to buy a family floater health insurance plan and pays Rs. 55,000 for the medical insurance for his parents. Moreover, he pays Rs. 12,000 for the family health check-ups and Rs. 10,000 for his parents’ checkups.

Now, the maximum tax deduction under Section 80D can be availed in the following manner:

• Expenses for Self, Spouse, and Children:

• Expenses for Parents (Senior Citizens):

  • The premiums paid in cash towards a health insurance policy are not eligible for tax deductions.
  • Premiums paid towards the health insurance policies for siblings, grandparents, uncles, and aunts are not eligible for tax benefits under Section 80D.
  • The premiums paid towards group health insurance by an employer are not eligible for tax deductions under Section 80D.
  • The service tax and cess amount added to health insurance premiums are not included under the Section 80D deduction list.