Health Insurance Tax Benefit

One of the major benefits of having a health insurance plan, apart from getting coverage for healthcare expenses is, that it provides tax benefits to the insured, under Section 80D of the Income Tax Act, 1961. Whether self-employed or salaried, everyone can avail tax benefits on the premium paid.

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**Tax benefits are subject to changes in Income Tax Act.

Health insurance plans let you enjoy double benefits from a single payment. Apart from providing you the much-needed financial protection with a wide range of coverage benefits, they also allow you income tax benefits on the premium paid for them, under Section 80D of the Income Tax Act, 1961. These tax benefits are not only available if the policy is purchased for yourself, but also when you buy them for your spouse, dependent children, and parents.

Tax Saving Options with Health Insurance

Apart from reimbursing expenses incurred on medical treatment, health insurance plans also act as an efficient tax-saving tool. The policyholders qualify for substantial tax deduction under Section 80D of the Income Tax Act, 1961 on the health insurance premiums paid to buy health insurance policies. Whether self-employed or salaried, the policyholders can avail tax benefits under the Income Tax Act. Availing tax benefits reduces the annual tax liability of the policyholder thereby offering him/her dual benefit of health coverage as well as tax deductions.

Every health insurance allows you to avail tax benefits on the premium paid for it whether the policy belongs to the proposer, his/her spouse, children, or parents. When buying a health insurance policy for parents, one must make sure to get the required coverage for all the possible medical conditions instead of just looking for higher tax benefits. This will help in getting the most suitable health insurance policy.

Income Tax Exemption Under Section 80D

As per Section 80D of the Income Tax Act, the premium paid for a health insurance policy is deductible from the taxable income. The upper limit for the deductible amount is Rs. 25,000 and can be extended for up to Rs. 50,000 for senior citizens (with effect from 1 April, 2018). This means that an individual can enjoy a deduction of up to Rs. 75,000 from the taxable income. In rare cases, when the age of both the proposer and his parents is more than 60 years, the deductible amount can extend up to Rs. 1,00,000 (Rs. 50,000+Rs. 50,000).

Deduction on Preventive Medical Checkups

You can save tax on preventive health checkups on a yearly basis. Under this feature, you can claim a maximum amount of Rs. 5,000.

Save Income Tax for Health Insurance Premiums Paid for Parents under Section 80D

You can enjoy a tax exemption of up to Rs. 25,000 every financial year against the premium paid for guardians. In case, your parents come under the senior citizen category, then the maximum limit extends up to Rs. 50,000 a year. The limit additionally comprises Rs. 5,000 towards annual health checkups of your parents.

Different Scenarios to Save Tax Under Section 80D

Scenarios indicating eligibility and deduction for saving tax under Section 80D:

1. You and your parents below 60 years - Up to Rs. 25,000 claims allowed for self, family, and children. An additional Rs. 25,000 claims allowed against the premium paid for parents. Total amount = Rs. 50,000.

2. You and your family below 60, but parents above 60 years - Up to Rs. 25,000 claims allowed against the premium paid for self, family, and children. An additional Rs. 50,000 claim amount for the premium paid for parents. Total amount = Rs. 75,000.

3. You, your family, and your parents above 60 years - Up to Rs. 50,000 claims against the premium paid for self, family, and children. Moreover, up to Rs. 50,000 claim amount for the premium paid for parents. Total amount = Rs. 1,00,000.

4. HUF (Hindu Undivided Family) - Up to Rs. 25,000 (premium paid for self, family, and children) and up to Rs. 25,000 (premium paid for parents) can be claimed. Total amount = Rs. 25,000 as tax benefits for parents available only if they are senior citizens.

5. Non-resident individual = Up to Rs. 25,000 claim amount for premium for self, family, and children. Parents considered for tax benefits only if they are senior citizens. Thus, the total amount = Rs. 25,000

Income Tax Saving for Senior Citizens

Following tax exemption under Section 80D on premium for senior citizens (60 years old or more, but below 80 years) is allowed.

  1. Claim deduction of up to Rs. 50,000 allowed on medical insurance premium during every fiscal year
  2. Rs.1 Lakh for medical treatment of particular critical illnesses
  3. If a super-aged father lacks insurance and the mother is a senior citizen, a tax deduction of Rs. 50,000 can be claimed.

To help you understand the concept better, the same has been tabulated below:

Situations

Premium Paid

Deduction under Section 80D of the Income Tax Act

Self, Family, Children

Parents

When the policyholder and parents are aged below 60 years

Rs. 25,000

Rs. 25,000

Rs. 50,000

When the policyholder and family members are aged below 60 years with parents aged above 60 years

Rs. 25,000

Rs. 50,000

Rs. 75,000

When the policyholder, family members, and parents are more than 60 years in age

Rs. 50,000

Rs. 50,000

Rs. 1,00,000

Members of the HUF (Hindu Undivided Family)

Rs. 25,000

Rs. 25,000

Rs. 25,000

Non-Resident Individuals (NRIs)

Rs. 25,000

Rs. 25,000

Rs. 25,000

Documents Required to Claim Income Tax Deduction

To claim an income tax deduction, you are required to submit your premium payment receipt and your insurance policy copy that must have the name of your family members, their age, and their relation with you. In case the premium is paid for parents, then you as the proposer must ask for an 80D certificate from the health insurance company, which will require you to provide the payment details in your name.

Are Tax Benefits Available in Both Indemnity Health Insurance Plans And Fixed Benefits Health Insurance Plans?

There are indemnity-based health insurance plans and fixed benefits health insurance plans in the market. The most popular ones, indemnity health insurance plans, pay for the actual hospitalisation expenses arising due to treatment, for up to sum insured. Whereas fixed benefit health insurance plans pay you a lump sum amount which you can use as per your requirement. For instance, critical illness plans pay you a lump sum on the diagnosis of the listed critical illnesses. The good news is that you can avail of tax benefits on the premium paid for both these plans.

You can avail yourself of the same amount of tax benefits whether you are paying a premium for an indemnity-based health insurance policy like individual health insurance policy, family health insurance policy, senior citizen health insurance policy, or benefit-based health insurance policy like daily hospital cash, critical illness policy, etc. You can avail of tax benefits under Section 80D of the Income Tax Act, 1961. Also, you can add riders to your health insurance policy by paying an extra premium, on which also you can avail of tax benefits under Section 80D.

Tax Benefits on a Multi-Year Health Insurance Policy

People who wish to buy multi-year health insurance plans can now avail of dual benefits of getting discounts on premiums as well as tax benefits on a pro-rata basis. In the case of multi-year health insurance policies, you can avail of tax benefits in a proportionate way over the years for which the policy has been purchased. For instance, if you have paid a premium of Rs. 30,000 for a 3-year health insurance policy, then you can avail of a tax benefit of Rs. 10,000.

It is recommended to buy a multi-year health insurance policy not only because of the above-mentioned benefits but also because the premium for them remains fixed throughout the policy term. This means that you do not have to worry about a premium hike in the coming years. You are required to pay the premium in a go which keeps you stress-free for the rest of the policy term.

What to Look For When Buying a Health Insurance Policy?

Health insurance plans are important not only because they come with tax benefits, but also because they cover you for a wide range of medical contingencies. Hence, it is important to choose your health insurance policy that is offered by a reliable insurance company. Currently, a few popular insurance companies offering health insurance plans in India are Care Health Insurance, Bajaj Allianz General Insurance Company, IFFCO Tokio General Insurance Company, Aditya Birla Health Insurance, and Max Bupa Health Insurance. The insurance companies, over the years, are constantly enhancing and diversifying plans so that people can purchase health insurance plans at affordable premiums. The companies offer different types of health insurance plans such as individual health insurance plans, family floater health insurance plans, senior citizens health insurance plans, critical illness health insurance plans, disease-specific health insurance plans, etc. Some of the features that you must check before buying a health insurance policy for yourself and your family members are:

  • Network hospitals: The more network hospitals an insurance company has, the easier it would be for you to avail cashless treatment. Hence, it is important to check the list of network hospitals and shortlist the ones that you would go to in case of an emergency.
  • Claim settlement process: Smooth and hassle-free claim settlement is all you would want in case of an emergency. Hence, you should check the claim settlement process when shortlisting a health insurance company.
  • Coverage benefits: Check that the health insurance policy covers you for maximum coverage benefits at an affordable premium. These include in-patient hospitalisation expenses, pre-hospitalisation and post-hospitalisation expenses, daycare expenses, road ambulance expenses, organ donor expenses, etc.
  • Customer care: It is important to check if the insurance company has a good customer care team that readily solves the queries of its customers.

Insurance companies are determined to ensure that your money is worth it at every stage. This also gets a boost with tax benefits under Section 80D. You can also use InsuranceDekho’s health insurance premium calculator to get an estimate of the health insurance premium to be paid, for a particular health insurance plan. This will help you plan finances as well as get an idea of tax benefits that you will be able to avail of under a particular policy.

Important Points to Remember

Following are the points that you should not forget to consider in order to avail tax benefits under Section 80D of the Income Tax Act, 1961, under health insurance plans:

  • Carefully read the terms and conditions related to tax exemption under your health insurance policy.
  • Avoid paying health insurance premiums in cash to avail of tax deductions.
  • In case you buy a health insurance policy for yourself and your parents, and all of you are senior citizens, then the maximum deduction under Section 80D can be availed of Rs. 1 Lakh.
  • Benefits under Section 80D can be availed in addition to tax breaks of up to Rs. 1.5 Lakh in Section 80C.

Health insurance plans are one of the best tax-saving instruments that help you to protect your savings from getting wasted on healthcare expenses. They also allow you to bring down your tax liability by allowing you to deduct up to Rs. 1 Lakh from taxable income, under Section 80D of the Income Tax Act, 1961. So, it is recommended to timely buy a health insurance policy to have a healthy and secured future.

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FAQ About Health Insurance Tax Benefit

  • Will I be eligible for tax benefits if I buy an indemnity based plan or fixed benefit plan?

    Yes, you will be entitled to tax benefits, irrespective of your policy type purchase. 

  • Can I avail of tax benefits on preventive health check-ups?

    Yes, you can avail tax benefits of up to Rs. 5,000 for preventative health check-ups under Section 80D of the Income Tax Act on a yearly basis. 

  • I want to pay my health insurance policy premium in cash. Will I be allowed to avail tax benefits in that case?

    No, you will not be allowed. If you want to be eligible for tax benefits, it is advised to pay your policy premium in payment modes other than cash. You can either choose internet banking, cheque, credit/debit card, or bank demand draft for premium payment purposes.

  • Can I avail tax benefits on premium payment made for a policy covering relatives other than my spouse, children, and parents?

    According to Section 80D of the Income Tax Act, you are allowed to avail tax benefits only on the premium paid for self, spouse, dependent children, and parents. Premium paid towards a brother, sister, grandfather, grandmother and other relatives cannot be claimed as a deduction for availing tax benefits. 

    To learn more about tax benefits, call our experts at 7551196989. We will also help you gather correct information about health insurance plans for you and your parents and continue to offer assistance even after you buy a policy for you.

  • Are there any tax deductions for expenses incurred by an individual for treatment of certain diseases?

    As per Section 80DDB, the expenses incurred by an individual on the treatment of some specific diseases are tax-deductible. These diseases include cancer (malignant), AIDS, Parkinson's disease, neurological disorders, hemophilia, chronic renal failure, and thalassemia. For people aged below 60 years, the upper limit for tax benefit is Rs. 40,000 and for those aged above 60 years, it is of Rs. 1 lakh.

    To learn more about tax benefits, call our experts at 7551196989. We will also help you gather correct information about health insurance plans for you and your parents and continue to offer assistance even after you buy a policy for you.

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*Standard T&C Apply. All savings/offers are provided by the Insurers, which are subject to modification .For more details on risk factors, terms and conditions, please read the sales brochure of respective insurers carefully before concluding a sale. Tax benefits are subject to changes in applicable tax laws. Girnar Insurance Brokers Private Limited, (CIN: U66010RJ2016PTC054811, Regd .Off: Girnar 21, Govind Marg, Moti Doongari Road, Dharam Singh Circle, Jaipur, Rajasthan- 302004; Corp. Off: 11th Floor, Tower B, Emaar Digital Greens, Golf Course Extension Road, Sector-61, Gurugram-122102, Haryana. IRDAI License no 588. Direct Broker (Life & General) valid till 19th March 2023. Email - support@insurancedekho.com ; Helpline number: 7551196989.
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