Health Insurance & Section 80D: A Smart Way to Save Tax in FY 2025–26

Updated on: August 25, 2025

In today’s world of rising medical costs and health risks, buying the right health insurance policy isn’t just good planning - it’s also smart tax strategy. Section 80D of the Income Tax Act offers deductions over and above the usual ₹1.5 lakh cap under Section 80C.

But to make the most of this benefit, you must understand what qualifies, who is eligible, and how to structure your policies correctly - especially under the old vs. new tax regimes.

Why Health Insurance Is a Must (Tax Benefit is a Bonus)

With medical inflation rising at 12–15% annually, a routine hospitalization in a Tier-1 city can cost ₹3–6 lakh. If you’re unprepared, these costs can derail your savings goals or force emergency withdrawals from long-term investments.

Having a robust personal health insurance plan helps you:

• Avoid dipping into your emergency corpus
• Reduce out-of-pocket costs in medical emergencies
• Get access to quality hospitals with cashless benefits
• Save tax under Section 80D (if you’ve opted for the old tax regime)

Why Your Employer’s Cover Is Not Enough

• Group covers often have low sum insured (₹2–5 lakh)
• May not cover parents, maternity, or OPD comprehensively
• Ends when you resign or retire

Also, if your employer pays the premium, you can’t claim tax deductions. To claim Section 80D benefits, the premium must be paid from your own pocket - and via non-cash modes.

Recommendation: Always buy a separate personal/family floater policy, even if you’re already covered at work.

What is Section 80D?

Section 80D provides additional tax deductions for money you spend on health insurance premiums (and certain related payments), over and above the ₹1.5 lakh deduction allowed under Section 80C.

You can claim it for: self, spouse, dependent children, and parents (whether or not dependent).

Important inclusions: Contributions to CGHS (Central Government Health Scheme) and other notified schemes also qualify within 80D limits.

Latest Deduction Limits Under Section 80D (FY 2025–26)

• Preventive health check-up: Up to ₹5,000, included within the relevant overall limit (not over and above).
• Multi-year premium: If you pay a 2/3-year policy upfront, you can spread the deduction equally across the policy tenure (e.g., 3-year policy → claim 1/3 each year).
• Senior citizens without insurance: You may claim actual medical expenditure up to ₹50,000 for a resident senior/super-senior citizen only if no health insurance policy is in force for them. (Payment must be non-cash.)

Deduction Matrix (Quick Scenarios)

Note: The ₹5,000 preventive check-up sits within the above limits; it is not extra.

Who Can Claim?

Eligible entities: Individual taxpayers (resident or NRI) and Hindu Undivided Families (HUFs).

Allowed payments: For self, spouse, dependent children, and parents. Premiums must be paid via non-cash modes (bank transfer, card, UPI, cheque, etc.). Preventive health check-ups are the only exception that may be paid in cash (within the ₹5,000 cap and overall limits).

NRIs filing in India can claim 80D for eligible family members subject to the same limits and conditions (policy should be from an IRDAI-regulated insurer).

Claiming Deduction When Premium is Split

If you and (say) your father both pay portions of a senior citizen policy premium, each of you may claim 80D in your own return only to the extent of your respective payment. Keep clear proofs (receipts/bank statements) showing the split.

AY 2025–26 ITR tip: When claiming 80D, be ready to provide the insurer’s name and policy number in the return for each policy you claim.

Working Children & Siblings - Are They Covered?

• You cannot claim a deduction for premiums paid for working (financially independent) children.
• You cannot claim for siblings, in-laws, or other relatives.
• You can claim for dependent children and for parents.

Preventive Health Check-ups - What’s Allowed?

Deduction: Up to ₹5,000 (counted within your relevant overall 80D limit). This can include annual body check-ups, blood tests, ECGs, cancer screening, etc.

Payment mode: Cash is allowed here (unlike regular premiums), but the cap is ₹5,000 and it sits inside your overall limit (it’s not extra).

Section 80D vs. New Tax Regime

Under the new tax regime (Section 115BAC), Chapter VI-A deductions like 80D are not allowed. Limited exceptions (e.g., 80CCD(2), 80CCH, 80JJAA) don’t include 80D. If you want to use 80D, you must opt for the old regime.

Quick call: If your 80D + other deductions (80C/24(b)/HRA, etc.) are meaningful, the old regime may still give you a lower tax outgo despite higher slab rates on paper. Run the numbers before locking your choice for the year.

Quick Decision Flow (Old vs New)

1. List your deductions: 80C (PF/ELSS/etc.), 80D, housing loan interest (24(b)), and other eligible items.
2. Estimate your taxable income under the old regime (after deductions) and under the new regime (most deductions disallowed).
3. If your total deductions are substantial (e.g., 80D + 80C + housing interest), the old regime often wins despite higher slab rates.
4. Run both numbers in a calculator and pick the regime that yields the lower tax for your income level.

How to Claim 80D While Filing ITR

Salaried employees: You can submit premium receipts to your employer during investment declaration or claim directly while filing your ITR if you missed it earlier.

Self-employed/consultants: Claim directly in your ITR. Keep all proofs handy.

Payment & Documentation Checklist (Quick)

• Premiums: Non-cash only (bank/card/UPI/cheque).
• Preventive check-up: Cash allowed up to ₹5,000, within the overall limit.
• Medical expenditure for seniors without insurance: Non-cash, up to ₹50,000, only if no policy is in force.
• Keep ready: Premium receipt, insurer’s tax certificate (if available), preventive check-up invoice, and for AY 2025–26, insurer name + policy number for each policy claimed.

Can Term Insurance Be Claimed Under 80D?

Generally, no. Term insurance premiums are eligible under Section 80C, not 80D. However, if your term plan has a critical illness or hospital cash rider, the portion of premium attributable to those health-related riders may be claimed under 80D (subject to limits).

Real-Life Example

Case: Dr. Anita (45) pays:

• ₹20,000 for a family floater (self, spouse, 1 child)
• ₹38,000 for her 65-year-old father

Eligible deduction:

• Family: ₹20,000 (within ₹25k cap)
• Father: ₹38,000 (within ₹50k senior cap)

Total claimable = ₹58,000

HUF Taxpayers: What You Can Claim

• Up to ₹25,000 for premiums for HUF members < 60
• Up to ₹50,000 for premiums for HUF members ≥ 60

The claim is made in the HUF’s return, not an individual’s return.

Common Mistakes & How to Avoid Them

• Paying premiums in cash (disallowed). Use non-cash modes; only preventive check-up (₹5,000 cap) can be paid in cash.
• Claiming for non-dependents (e.g., working children, siblings). Stick to self, spouse, dependent children, and parents.
• Double-claiming when the employer has paid/credited the premium for the group policy.
• Confusing 80D with 80DD/80DDB - these are different sections with different conditions and documents.
• Ignoring the no-policy condition for senior citizens’ medical expenditure claims.
• Not maintaining insurer name and policy number details for ITR (AY 2025–26 requirement).

Final Takeaways

• Section 80D can help you claim up to ₹1 lakh/year across self/family and parents, depending on ages and coverage.
• Buy a separate personal/family policy - don’t rely only on employer insurance.
• To claim 80D, you must choose the old regime.
• Keep receipts, insurer details, and payment proofs ready (AY 2025–26 asks for insurer name & policy number).
• Use the preventive check-up head wisely - remember it’s inside the overall limit.

FAQs

Is 80D allowed in the new tax regime?

No. Under Section 115BAC, Chapter VI-A deductions like 80D aren’t allowed (limited exceptions don’t include 80D). Choose the old regime to use 80D.

Can I pay in cash and still claim?

You can pay in cash only for preventive health check-ups up to ₹5,000 (and this sits within your overall 80D limit). Regular premiums must be paid via non-cash modes.

Parents not insured - what can I claim?

For a resident senior/super-senior with no policy, you can claim medical expenditure up to ₹50,000 (non-cash).

Do CGHS contributions qualify?

Yes. Contributions to CGHS or other notified schemes qualify within 80D limits.

What details does ITR ask for now?

From AY 2025–26, when you claim 80D, you should keep the insurer’s name and policy number handy for each policy.

Disclaimer: This article is for education only. Tax rules change and individual eligibility varies. Please consult your tax advisor before filing.