How to claim health insurance deductions under Section 80D

As health insurance premiums rise, policyholders must look at ways to leverage tax deductions under Section 80D of the Income Tax Act. This provision, which is currently only available under the old tax regime, allows policyholders to claim deductions for premiums paid towards health insurance policies, thus reducing their taxable income and tax liability.

The Basics of Section 80D

As medical costs rise, the tax relief offered under Section 80D provides a valuable incentive for individuals and families to secure health insurance coverage while lowering their tax burden. “By claiming deductions under Section 80D, you not only secure health insurance coverage for yourself and your family, but you also reduce your taxable income, resulting in potential tax savings. This makes it a win-win situation for both your health and your finances,” says Shashi Kant Dahuja Executive Director and Chief Underwriting Officer of Shriram General Insurance.

What is the tax deduction breakup under Section 80D?

Dahuja says that claiming deductions on health insurance premiums typically involves including the premium payments on your tax return. “Health insurance not just provides a safety net against the medical expenses but also provides tax deduction of up to ₹25,000/- to ₹1,00,000/- under section 80D,” he adds.

For an individual or a Hindu Undivided Family (HUF), the deduction limits under Section 80D are:

Self and Family (Spouse, Children): A deduction of up to ₹25,000 is allowed for the premiums paid on policies covering the individual, spouse, and children.
Senior Citizens (60 years or above): If the individual or any family member is a senior citizen (aged 60 or more), the deduction limit increases to ₹50,000 for premiums paid.
Parents (Under 60): A deduction of up to ₹25,000 is available for premiums paid towards the health insurance policy of the taxpayer’s parents, even if they are not dependent on the taxpayer.
Parents (Senior Citizens): For premiums paid towards the health insurance of senior citizen parents, the maximum deduction extends to ₹50,000.
Thus, a taxpayer can claim a maximum of ₹1 lakh if they have insured themselves and their family, as well as senior citizen parents.

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How to claim the deduction

Claiming the tax deduction is straightforward. To begin, the individual must have an existing health insurance policy with a recognised insurance provider. The premiums can be paid via any mode – online, cheque, or cash (though digital payments are encouraged for better record keeping).

To claim the deduction, the taxpayer must declare the premium payments while filing their income tax return (ITR). The process involves the following steps:

Step 1: Choose the Right ITR Form: Most salaried individuals will file their tax returns using ITR-1, but if the taxpayer has more complex income sources (like business or freelance income), ITR-3 or other applicable forms may be required.

Step 2: Enter the Premium Details: Under the “80D” section of the ITR form, the taxpayer will need to enter the premium amount paid, specifying the policyholders (self, family, and parents). If the taxpayer is claiming a higher deduction for senior citizen parents, this must be appropriately mentioned.

Step 3: Proof of Premium Payment: While filing, the individual is not required to submit the health insurance premium receipts as supporting documents. However, taxpayers should retain these receipts and payment proofs in case they are asked to provide them during an income tax assessment.

Step 4: Filing the Return: After completing the relevant sections of the return, including the deduction for health insurance premiums, the taxpayer can submit the return either online or in physical form. If online, the taxpayer will also receive an acknowledgment.

Can you maximise tax deductions under Section 80D?

Taxpayers should remember that the deductions available under Section 80D are not just restricted to health insurance premiums but can also include premiums for critical illness riders or preventive health check-up policies. The limit for deductions under preventive health check-ups, however, is restricted to ₹5,000 per annum for an individual, their spouse, children, and parents combined. This means taxpayers can utilise this benefit in addition to their regular health insurance premium deductions.

Also Read : Budget 2025: A look at proposed changes for income tax exemptions and savings