Tax Saving on Health Insurance (Section 80D) – Detailed Guide for FY 2023-24

Health insurance is like an umbrella – something that you don’t need every day; but once in a while when it rains, it really saves the day for you. On all other days, you won’t miss it. But when it rains and if you don’t have it, you will feel its need.

A good health insurance policy helps to protect your financial savings and makes you better prepared for medical emergencies and expenses.

And besides the obvious medical coverage, health insurance plans also provide tax benefits to you.

Luckily, under Section 80D of the Income Tax Act, you get tax benefits for expenses towards health insurance premiums, preventive health checkup and other medical expenses.

Since most of you will not be hospitalized ever (I hope so!), you would be more interested in the tax benefits on the medical insurance premiums. And yes, indeed the premium paid towards health insurance is tax deductible under section 80D of the Income Tax Act, 1961.

Let’s move on and understand the tax benefits on health insurance in a bit more detail.

What is Section 80D that gives Tax Benefits on Health & Medical Insurance?

Even if tax benefits weren’t there, even then buying health insurance is a sensible decision.

Why would you want to pay big hospital bills when you can buy medical insurance by paying a small premium to cover that risk.

Imagine not buying health insurance and saving Rs 10,000 for 3-4 years and then getting hospitalized with a big bill of Rs 5 lakh. All small savings you made by ‘not buying’ health insurance is screwed up with a medical bill several times larger.

Unfortunately, most Indians still don’t see it like that.

They feel its an unnecessary expense and waste of money. Luckily, our governments have offered additional freebies in form of tax benefits to push people to buy health insurance.

And this benefit is offered via the Section 80D of the Income Tax Act, 1961 which relates to the tax deductions on medical insurance.

Section 80D specifically provides deduction in taxable income to the extent of the premiums paid on the purchase of health insurance or medical insurance or mediclaim products.

It even includes the premiums paid for the health insurance of your parents, children and spouse (wife/ husband).

And it doesn’t matter whether you purchase health insurance through a person or go for an online health insurance cover which are gaining popularity these days. You will get tax benefits in either case.

Also, the tax benefits under Section 80D are over and above the benefits under other sections like Section 80C.

Who is eligible for Tax Benefits under Section 80D?

If you are paying premiums for health or medical insurance purchased for the following, you will get tax benefits under section 80D:

• Yourself
• Your spouse
• Dependent children
• Parents

What about other family members?

Like, let’s say your brothers, sisters, father-in-law, mother-in-law, uncles, aunts, cousins, etc.?

Health insurance premium paid for any other person is not eligible for tax deduction. But you can ofcourse include other family members in the health insurance coverage if you wish to. It is just that the premium paid for them cannot be considered for tax benefits.

Maximum Deduction Limit under Section 80D for FY 2023-24

There are several different types of deductions that you can be claimed for tax benefits under Section 80D:

• Tax deduction on health insurance premiums paid for yourself, spouse & children
• Tax deduction on health insurance premiums paid for parents
• Tax deduction on medical expenses of super senior citizens
• Tax deduction on preventive health check-up expenses

Let’s have a look at each of these in detail:

Tax Deduction on Health Insurance Premiums Paid for Self, Spouse & Children (Family):

• If you pay the premium for health insurance taken for you, spouse and children, then you can claim a total deduction of up to Rs 25,000 for FY 2023-24
• If you or spouse is a senior citizen, then you can claim a higher total deduction of up to Rs 50,000 for FY 2023-24. This limit for senior citizen was revised upwards in the past years. Earlier (in FY 2017-18 AY 2018-19), if you or spouse were a senior citizen, then the maximum deduction that could be claimed was up to Rs 30,000. This has now been revised to Rs 50,000.

In addition to the above deduction, you can also get tax deductions for premiums paid for parents.

Tax Deduction on Health Insurance Premium Paid for Parents: 

If you pay the premium for medical or health insurance of your parents’, then you can claim deductions as follows:

• If both parents are not senior citizens (< 60 years), then you can claim a deduction of up to Rs 25,000 for FY2023-24
• If even one parent is a senior citizen (>=60 years), then you can claim a deduction of up to Rs 50,000 for FY2023-24. This limit for senior citizen was revised in the past year. Earlier (in FY 2017-18 AY 2018-19), if your parents were senior citizens, then the maximum deduction that could be claimed was up to Rs 30,000. This has now been revised to Rs 50,000.

It is worth noting that while claiming deductions under Section 80D, you cannot include premiums paid for children who are earning. But you can still claim the benefit for earning spouse and parents.

Tax Deduction on Preventive Health Checkup Expenses:

If you spend money on getting health checkups done during the financial year, then you can also claim a deduction of up to Rs 5000 for preventive health checkup for self, spouse and children under Section 80D.

But this is not an additional benefit but is inclusive within the overall limits discussed above. That is, the total tax benefit for health insurance premium and preventive health checkup is limited to Rs 25,000 (or Rs 50,000), as the case may be. Remember that the limit of Rs 5000 is the maximum total deduction allowed for preventive health check-ups.

Also, this deduction cannot be claimed on a per person basis but as an aggregate option available – so the total deduction allowed cannot be more than Rs 5000.

For example – Suppose you pay a health insurance premium of Rs 21,000 for self, wife and children. In addition, you also get yourself a preventive health checkup that costs Rs 6000. Now, how much tax deduction are you eligible for? You are allowed a maximum deduction of Rs 25,000 under Section 80D. So you get a deduction of Rs 21,000 towards insurance premiums paid; and Rs 4000 for expenses towards preventive health check-up. The deduction towards preventive health check-up has been restricted to Rs 4000 (against your actual expense of Rs 6000) as the overall deduction cannot exceed Rs 25,000 in this case (i.e. Rs 21,000 + Rs 4000).

Side Note – As you cross 35-40, it actually makes sense to get yourself evaluated medically atleast once a year so that any condition/disease in its early stages can be better handled and addressed appropriately. So this tax deduction on preventive health check-up expenses under section 80D also has positive health side effects!

Tax Deduction on Medical Expenses for Uninsured Senior Citizens (>= 60 years) (Section 80D) – You or Parents

If you or any of your parents are a senior citizen, i.e. above 60 years, and have not purchased any health or medical insurance, then you can avail a deduction for any medical expenditure incurred up to Rs 50,000 in FY2023-24.

Remember, to claim this deduction for actual medical expense, the concerned person must be a senior citizen (you, spouse or parents) and also uninsured (i.e. no premium should have been paid for any health insurance).

Before FY2018-19 and till FY2017-18, this rule was applicable for uninsured ‘very senior’ citizen (above 80 years) and the limit was set at Rs 30,000 per financial year. Now, this benefit is available to younger(!) senior citizens (who are above 60 years) too.

So let me summarize the Income Tax deduction of Health Insurance Premiums in India.

Tax Deductions under Section 80D for Health Insurance (Financial Year 2023-24)

The table below lists the tax deduction limits applicable to health insurance premiums (for the financial year FY2023-24):

So what will be combined limits on tax deductions for a family with self, spouse, children and parents?

• If you, spouse, children and parents are all below 60 years of age, then the total limit is Rs 25,000 + Rs 25,000 = Rs 50,000 under Section 80D
• If you, spouse, children are below 60 years; and if even one of your parents is above 60 years of age, then the total limit is Rs 25,000 + Rs 50,000 = Rs 75,000 under Section 80D
• If any of you or spouse is above age 60; and if even one of your parents is also above 60 years of age, then the total limit is Rs 50,000 + Rs 50,000 = Rs 1,00,000 Rs 1 lakh under Section 80D

But please do remember that these are maximum limits specified under Section 80D. If the actual premium paid is less than the limits, then the benefit will be limited to the actual premiums paid only.

To further aid the understanding, allow me to share a few examples.

Examples of Medical Insurance Premiums & Section 80D Tax Benefits

Case 1: You (28), Spouse (27), Child (2), Father (58), Mother (56)

You are eligible for Rs 25,000 towards health insurance premium and checkup for self, spouse and child. In addition, you are also eligible for Rs 25,000 towards health insurance premium and checkup for parents. Since no one in the family has attained 60 years of age, the total deduction eligible under Section 80D is Rs 50,000 for the financial year.

Case 2: You (31), Spouse (29), Child (4), Father (63), Mother (58)

You are eligible for Rs 25,000 towards health insurance premium and checkup for self, spouse and child. In addition, you are also eligible for Rs 50,000 towards health insurance premium and checkup for parents (as one of the parent is above 60). Since one of the parents has attained the age of 60, the total deduction eligible under Section 80D is Rs 75,000 for the financial year.

Case 3: You (61), Spouse (55), Father (82), Mother (79)

You are eligible for Rs 50,000 towards health insurance premium and checkup for self and spouse as you are in senior citizen category yourself. In addition, you are also eligible for Rs 50,000 towards health insurance premium and checkup for parents (as one or both the parent are above 60). Since both you and your parents have crossed the age of 60, the total deduction eligible under Section 80D is Rs 1,00,000 or Rs 1 lakh for the financial year.

Sample Calculation of Tax Deductions under Section 80D

Suppose you are aged 38, your wife is 35, son is 8 and daughter is 5 years old.

You have taken a health insurance plan for all for of you that has an annual premium of Rs 23,000. In addition, you had to pay Rs 8000 for preventive health checkup during the financial year.

In addition, your parents aged 66 and 59 are also dependent on you. For insuring their health, you have taken a health cover for them separately for which the premium is Rs 57,000.

So what all tax deductions can be claimed by you for the financial year under Section 80D?

• For Self (+ spouse + children) – All of you are under the age of 60. You are eligible for Rs 25,000 towards health insurance premium and checkup for self, spouse and child. Since the premium + health checkup costs exceed the limit (Rs 23,000 + Rs 8000 = Rs 31,000), the benefit available will be limited to Rs 25,000 only.
• For Parents – One of the parents is above 60 and hence, senior citizen. Since you are paying medical insurance premium for them, you are eligible for Rs 50,000 towards health insurance premium. Since the premium exceeds the limit (Rs 57,000), the benefit available will be limited to Rs 50,000 only.
• Therefore, the total deduction available in this case will be Rs 25,000 + Rs 50,000 = Rs 75,000 only.

I hope this fully explains everything there is about the tax savings that you can do with your health insurance under Section 80D.

So let’s move on…

Tax benefit on Multi-year Health Insurance policy under Section 80D

Many people pay health insurance premiums for several years in one go as there are discounts on offer for multi-year health insurance policies.

If that’s the case, then the tax deduction is allowed proportionately over the years for which the benefit of health insurance is available, subject obviously to the overall limit for each financial year).

So let’s say you are 35 years old (i.e. less than 60 years) and your health insurance policy for 1 year has a premium of Rs 15,000 and that for 2 years us Rs 27,000.

So if you go for the 2-year health insurance plan and pay the premium for two years in one financial year itself, then what will be the tax deductions eligible?

Since current rules state that an individual is allowed to claim a deduction of up to Rs 25,000 in a financial year, you will be allowed to claim the total premium paid, but proportionately, over the 2-year period. This means that you will get a tax deduction of Rs 13,500 each (Rs 27,000 divided by 2) in both the financial years.

More things to know about Section 80D tax benefits

• It is not necessary to claim deduction using just one policy. You can claim deductions under multiple policies subject to overall limits of Rs 25,000 or Rs 50,000 as explained earlier.
• The group health insurance premium paid by your employer is not eligible for deduction under Section 80D. However, if you pay an additional premium to increase the coverage of the existing group cover, then you can claim the deduction against this additional contribution.
• The premiums paid for Critical Illness policies are also eligible for tax benefits under Section 80D.
• The premiums paid for Top-Up or Super Top-Up health insurance plans are also eligible for tax benefits under Section 80D.
• The premiums of term life insurance plans are not included in Section 80D. But in any case, term insurance premiums are eligible for tax benefits under Section 80C instead. (Related: How much life insurance to buy?)
• If you have taken a Critical Illness rider as part of the life insurance policy, then the premium paid for the specific rider is eligible for tax deduction under Section 80D.
• Whether you are paying a health insurance premium for the first time or you are paying the renewal premium for continuing your existing health insurance, you can claim deductions in either case.
• As mentioned earlier, you cannot get benefits on health premiums paid for your brother or sister. You can also not claim benefits for premiums of your father-in-law and mother-in-law. But if your spouse, if paying the premiums from her own taxable income, then the benefits can be claimed by your spouse.

A lot of people get confused between Section 80D and the very popular Section 80C of the Income Tax Act. Let’s briefly see what is the major difference between the two.

Difference between Section 80D and Section 80C

Section 80C of the Income Tax Act provides deductions of up to Rs 1.5 lakh per year on money spent on various options like life insurance premiums, EPF (& VPF) contributions, PPF savings, NPS, NSC, tax saving ELSS mutual funds, school fee of children, home loan repayment, etc.

(Read more here on how to save tax using Section 80C.)

On the other hand, Section 80D is, in addition, to limit of Section 80C and is meant exclusively for health insurance premiums paid and preventive health checkup, etc. The tax benefit available under Section 80D varies from Rs 25,000 to Rs 1 lakh subject to certain conditions.

I am sure that by now, you would have a clear idea about how to save taxes using health insurance in India.

But let me remind you that whether you get tax benefits or not, health insurance is extremely important.

It’s a must-have for everyone!

Why would anyone want to be penny-wise-pound-foolish and try their lucks? The medical costs are rising and just one visit to a hospital and hospital bill can set you back by a lot of money which will be much higher than the money you can save by avoiding health insurance.

If you are unlucky and end up in a hospital without health insurance, it can erode your hard-earned savings and plunge you in a financial crisis. So do not test your luck for saving just a few thousands.

Luckily in India, you are getting tax benefits on the health insurance premiums you pay.

So you have an added incentive there. You can maximize your tax savings by using health insurance for yourself, family and parents by paying the premiums.

The Section 80D of the Income Tax Act offers one of the best tax-saving benefits in India of up to Rs 1 lakh deduction specifically for premiums paid on the purchase of health insurance or medical insurance or mediclaim products. Do not ignore this tax benefit for your own good.