The Union Budget 2025-26 has brought renewed focus on tax relief measures, particularly in the area of health insurance tax benefits. One of the key expectations from the budget was an increase in the deduction under 80D, which provides tax relief on health insurance premiums. With rising medical costs and increasing healthcare inflation, expanding the deduction limit under section 80D is crucial for taxpayers, particularly those under the new tax regime.
This article explores how a higher deduction under 80D could benefit taxpayers and improve overall financial security by maximising the available health insurance tax benefits.
Understanding section 80D and its role in tax planning
Section 80D of the Income Tax Act allows individuals to claim deductions on premiums paid for health insurance policies for themselves, their families, and their parents. This deduction provides a financial incentive to encourage people to secure health insurance coverage while also offering a significant health insurance tax benefit.
Currently, the deduction limits under section 80D are as follows:
- Rs. 25,000 per year for individuals below 60 years of age.
- Rs. 50,000 per year for senior citizens (aged 60 and above).
- Rs. 50,000 per year for individuals paying premiums for their senior citizen parents.
- An additional deduction of Rs. 5,000 is available for preventive health check-ups.
With healthcare costs increasing at a rate of 14 percent annually, taxpayers, especially middle-class families, find the existing limits insufficient to cover medical expenses and insurance premiums. An increase in section 80D limits would enhance the overall health insurance tax benefit, making it easier for individuals to afford comprehensive health coverage.
Why the section 80D limit should be increased
Rising healthcare costs and medical inflation
Medical expenses in India have skyrocketed in recent years. Reports indicate that healthcare inflation is higher than the general inflation rate, making it harder for individuals to afford quality healthcare. By increasing the deduction under 80D, the government can provide much-needed tax relief, enabling people to afford better health insurance coverage while maximising the health insurance tax benefit.
Limited access to quality healthcare
A higher deduction limit under section 80D can improve accessibility to better healthcare facilities. Many taxpayers hesitate to purchase higher coverage insurance plans due to the financial burden of premiums. An increased tax deduction can encourage people to opt for more comprehensive health insurance policies that provide better coverage. This would further reinforce the advantages of the health insurance tax benefit, ensuring that more individuals and families are financially protected against medical emergencies.
Financial relief for senior citizens
Senior citizens require higher medical attention due to age-related health issues. The current deduction limit of Rs. 50,000 is often insufficient to cover their medical needs. Increasing the section 80D limit for senior citizens would ensure they receive better healthcare without excessive financial strain on their families. The enhanced health insurance tax benefit would encourage families to invest in higher coverage plans for elderly members, providing them with better medical care.
Incentivising preventive healthcare
Preventive healthcare plays a vital role in reducing the overall burden of medical expenses. The current Rs. 5,000 deduction for preventive health check-ups is relatively low. Raising this limit would encourage more individuals to undergo regular health screenings, leading to early diagnosis and reduced treatment costs in the long run. A higher preventive healthcare deduction would also strengthen the health insurance tax benefit, allowing more taxpayers to take advantage of financial relief while prioritising their well-being.
Impact on taxpayers under the new tax regime
Increased disposable income
A higher deduction under 80D would allow taxpayers to save more on their taxable income, leading to increased disposable income. This additional financial relief can be used for savings, investments, or emergency medical needs. By maximising the health insurance tax benefit, individuals will have greater financial security to handle unexpected medical expenses.
Encouraging health insurance adoption
Many taxpayers in India still do not have adequate health insurance coverage. Increasing the deduction under 80D would serve as a strong incentive for individuals and families to invest in health insurance, ensuring broader financial security in case of medical emergencies. The additional health insurance tax benefit would further motivate individuals to prioritise health insurance as an essential component of financial planning.
Simplified tax planning
For individuals under the new tax regime, where most exemptions and deductions have been removed, an increase in section 80D deductions would provide much-needed relief. This would allow taxpayers to reduce their taxable income while ensuring adequate healthcare protection. The additional health insurance tax benefit would make it easier for taxpayers to plan their finances effectively while securing quality healthcare coverage.
Expectations from the government
Taxpayers and financial experts have long advocated for an increase in section 80D deductions to keep pace with rising medical costs. As healthcare expenses continue to surge, the existing deduction limits are no longer sufficient to provide adequate financial relief. Many argue that a revision is necessary to align tax benefits with the increasing cost of medical treatments and insurance premiums. This is particularly crucial for middle-class families and senior citizens who face higher healthcare expenses.
The government is expected to consider the following measures:
- Raising the deduction limit for individuals below 60 years from Rs. 25,000 to Rs. 50,000.
- Increasing the deduction limit for senior citizens from Rs. 50,000 to Rs. 75,000 or more.
- Enhancing the preventive health check-up deduction from Rs. 5,000 to Rs. 10,000 to encourage early disease detection.
- Offering additional tax incentives for individuals opting for comprehensive health insurance plans with higher coverage.
- Introducing special deductions for families with dependent members suffering from chronic illnesses to reduce financial strain.
- Encouraging health insurance penetration by providing incentives for first-time health insurance buyers, particularly in rural areas.
A revision in section 80D would not only support taxpayers but also strengthen the health insurance industry, making quality healthcare more accessible to a larger population. Expanding the health insurance tax benefit would ensure that individuals and families have the necessary financial resources to cope with rising medical expenses without compromising their savings.
Conclusion
Increasing the deduction under 80D in the Union Budget 2025-26 would provide significant financial relief to taxpayers, encourage higher health insurance adoption, and improve overall healthcare security. With medical expenses continuing to rise, the government must take proactive steps to support individuals in managing healthcare costs effectively. A higher deduction limit would not only ease the tax burden but also promote better financial and health planning for taxpayers across different income groups. By enhancing the health insurance tax benefit, more individuals will be encouraged to secure adequate health coverage, ultimately improving financial stability and healthcare accessibility for millions of Indians.
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