A Detailed Guide on Health Insurance Tax Benefits

With the constant rise in medical expenses, having a comprehensive health insurance plan has become extremely important. From family health plans to senior citizen health insurance plans, there are varied options available when it comes to choosing the best health insurance plan for yourself. Health insurance isn't just a shield that ensures protection for you and your loved ones, it is also a great tax-saving option. As the tax declaration period is almost here, don't overlook the importance of health insurance for saving taxes. This blog will give you a detailed understanding of how to avail tax benefits on health insurance.

What is the Tax Benefit on Health Insurance?

Wondering whether health insurance is tax exempted or not? If so, the answer is yes! You can save on taxes if you have a valid health insurance policy. In addition to protecting you against health emergencies, you can also save on taxes with such plans. The tax benefit is available on the premium that is paid towards the health insurance plan. However, please note that the tax benefits are subject to changes as per the Income Tax Act of 1961.

Health Insurance Tax Benefits Under Section 80D

According to section 80D of the Income Tax Act of 1961, Indian taxpayers can save on taxes if they have an active health insurance policy. As there are many health insurance policies available, the tax benefit varies depending on the type of plan you are buying. The tax benefit on health insurance is also dependent on many other factors such as those listed below:

• Policy Type and Coverage: The type of health insurance policy and the extent of coverage play a crucial role in determining the tax deduction you can claim. Different policies may have varying tax benefit amounts, and more comprehensive coverage might result in higher deductions.
• Age and Health Status: Tax benefits under health insurance, especially for senior citizens, are often more favourable as they offer higher tax saving opportunities. Additionally, the health condition of the insured can influence the premium and, consequently, the tax benefits.
• Number of Dependents: The number of dependents covered under the health insurance policy affects the overall deduction. Policies covering family members, including parents, may result in increased tax benefits.
• Preventive Check-ups: Some health insurance policies offer benefits for preventive health check-ups. Opting for such add-ons can impact the overall tax savings.

Eligibility For Tax-savings Under Section 80D

To get tax savings under Section 80D of the Income Tax Act, you need to meet specific eligibility criteria as enumerated below:

• Indian taxpayers paying health insurance premiums for themselves, their family, or their parents qualify for deductions
• The eligibility extends to Hindu Undivided Families (HUFs) as well. The insured can be the taxpayer, spouse, dependent children, and parents, covering a broad spectrum of family structures. 

Being mindful of these eligibility criteria ensures individuals and families get maximum tax-saving benefits while prioritising their healthcare needs at the same time.

Maximum Tax Benefit Available on Health Insurance

The amount eligible for deduction depends on the age of the insured and the premium paid. Here is a table that will help you with the maximum amount you can claim as tax benefits based on different scenarios:

Things to Know About Health Insurance Tax Benefits

When it comes to claiming tax deductions with your health insurance plan, there are certain things that you need to be aware of such as those listed below:

• Mode of Payment: To be eligible for getting tax benefits, you must make the premium payment through digital modes. In case you have made the payments through cash, you will be unable to get tax benefits. However, please note that for preventive health check-ups, you can make the payments in cash and still get tax benefits.
• Services Charges: The service charges which have been levied upon on health insurance are not tax exempted.
• Group Health Insurance: While most of the health insurance plans qualify for tax deduction, group health insurance plans stand as the only exception. This is because such plans are sponsored by employers. However, if you make any changes to the policy and pay a premium for the additional changes, then you will qualify for tax benefits.
• The objective of Section 80D: You must be clear that section 80D provides tax-saving opportunities on health insurance plans only, However, there is section 80C that lets you save taxes on life insurance and investment plans.
• Policy-based Deductions: As already stated, you must be clear that the tax deduction limit is dependent on the type of policy you are buying. You can get a higher tax benefit if you have a senior-citizen health insurance plan.

Take Away

Thus, as health insurance serves dual benefits of protection against medical emergencies and tax benefits, its benefits cannot be overlooked. So, ensure that you save maximum on income taxes with your health insurance plan.

FAQs

Q. Will I be eligible for tax savings if I am buying health insurance for my senior citizen parents?
A. Yes, you will still be eligible for tax-savings even if you are buying a health insurance plan for your senior citizen parents.

Q. What is the maximum amount of tax that can be saved under section 80D?
A. Under section 80D, you can save a maximum of Rs. 1 lakhs.

Q. What are the things to consider when claiming tax benefits under health insurance plans?
A. There are many things you need to consider when claiming tax benefits with a health insurance plan such as mode of payment, service charges, type of health insurance plan, and age of the eldest member.

Q. Can I save taxes on preventive health check-ups?
A. Yes, you can save taxes on preventive health check-ups as per section 80D of the Income Tax Act.