Section 80D: Deductions for Medical & Health Insurance

A medical emergency can knock on your door at any point in time and burn a deep hole in your savings. To be prepared for such unexpected events, the importance of health insurance can never be overlooked.  A health insurance plan which is basically an agreement between the insurance company and policyholder provides financial assistance in case the latter meets with any medical emergency. In addition to providing financial assistance during medical emergencies, a health insurance plan also provides tax benefits as per section 80D of the Income Tax Act. In the section below, let’s discuss more about it.

Overview of Section 80D

According to Section 80D of the Income Tax Act of 1961, the premium paid towards health insurance is exempted from tax deductions. Whether salaried or self-employed, you can save on taxes if you are paying premiums towards health insurance plans. The tax deductions applicable under section 80D are dependent on a lot of factors such as policy type, mode of premium payment, your relationship with the policyholder, and a lot of other things. 

Eligibility Criteria to Claim Under Section 80D

To avail the tax benefits under Section 80D of the Income Tax Act in India, individuals must meet certain eligibility criteria. Tax savings are as stated applicable on premiums paid for health insurance policies. 

• To qualify, taxpayers should have purchased a health insurance policy for themselves, their spouse, children, and dependent parents. 
• The premiums can be paid for policies issued by insurers approved by the Insurance Regulatory and Development Authority of India (IRDAI). 
• The maximum deduction allowed depends on the age of the insured and their family members. 
• Senior citizen health insurance plans provide higher tax benefits. Additionally, senior citizens above 80 years are eligible for an even higher deduction. 
• It is thus essential to ensure that the premiums are paid through online mode. 

Meeting these criteria allows taxpayers to enjoy the dual benefits of safeguarding their family's health and reducing their taxable income.

Maximum Limit to Claim Under Section 80D

The maximum amount that can be claimed under section 80D is mainly dependent on the type of health insurance plan you have bought. To help you out, we have outlined a table that details the tax deductions under different scenarios:

How to Calculate Tax-savings Through Section 80D?

As already stated, to calculate tax savings through section 80D, you need to consider the number of individuals covered under the policy and the type of policy you have purchased. Let us understand this with an example: Ram is 58 years old and he has bought a health insurance plan for his family. His family includes a wife and a 15-year-old son. In this case, if Ram is paying Rs. 47,000 towards health insurance premiums, then all of it can be exempted from tax deductions under section 80D of the Income Tax Act. Moreover, if a senior citizen is also included in the plan, then the tax deductions will be higher. 

Things to Remember While Claiming Under Section 80D

There are certain things you need to remember while claiming tax exemptions under section 80D such as those listed below:

• You must check the eligibility criteria as this will be helpful in whether you are eligible for tax savings or not
• You must be aware if you are paying premiums for a family health insurance plan or an individual plan as the threshold limit varies for both
• Make sure that you have all the documents in place so that there is no discrepancy when you are claiming tax savings under section 80D
• You must also ensure that the health insurance policy is in your name, covering yourself, your spouse, children, and dependent parents
• Deductions on health insurance premiums are applicable only for premiums paid online and not cash transactions. Thus, you must maintain a record of payment receipts and bank statements as proof. Keep all relevant documents, including policy certificates, premium payments, and a record of the insured individual's age
• A group health insurance plan sponsored by an employer is not eligible for tax savings. 

In addition, you can also speak to a financial advisor who will help you maximise tax savings on health insurance plans. 

Tax Benefits on Preventive Health Check-ups

Under Section 80D of the Income Tax Act, individuals can claim tax benefits on preventive health check-ups as well. Preventive check-ups as the name suggests are medical tests performed to assess the well-being of an individual and reduce the chances of diseases. Taxpayers can avail deductions for the expenses incurred on preventive health check-ups for themselves, their family, and their parents. 

The maximum deduction allowed is ₹5,000 within the overall limit for health insurance premiums. Moreover, you can pay for preventive health check-ups through cash as well. With this tax benefit on health check-ups, you can prioritise preventive healthcare and enjoy tax savings at the same time. However, you must keep proper receipts and documentation of health check-up expenses as it is essential for the income tax filing process.

Understanding Preventive Health Check-ups Tax Benefits With An Example

Let us consider 25-year-old Rahul w

ho is paying a health insurance premium of Rs. 22,000. He has also had a preventive health check-up done for himself which was around Rs. 6,000. As per the Income Tax Act of 1961, Rahul can claim a maximum of Rs. 25,000. The tax benefits for preventive health check-ups in this case will only be Rs. 3000 as the remaining will be claimed under health insurance premium and the total tax-saving amount cannot exceed Rs. 25,000.

Tax Savings on Multi-year Health Insurance Policies

A multi-year health insurance plan as the name suggests has a longer policy term. The discounts offered under multi-year health insurance plans are higher as compared to other plan types. However, you must check the tax savings applicable to a multi-year health insurance plan. For instance, if you have bought a multi-year health insurance plan for 3 years and pay a premium amount of Rs. 30,000. Then, in this case, you can claim a deduction of Rs. 10,000 for the policy term.

Take Away

Thus, by getting health insurance coverage for yourself, your family, and your dependent parents, individuals, you will not only ensure a safety net for medical contingencies but also get opportunities to reduce taxable income. 

FAQs

• What is the maximum tax deduction applicable to a health insurance plan?
• You can get a tax deduction of up to Rs. 1.5 lakh depending on the type of health insurance plan you have bought.

• Can I get tax benefits on preventive health check-ups?
• Yes, tax benefits are applicable on preventive health check-ups. The maximum limit is up to Rs. 5,000.

• Can I get tax benefits if I have paid health insurance premiums through cash?
• No, tax benefits are not applicable if you have paid health insurance premiums through cash.
• Who can claim tax savings under section 80D?
• Any individual residing in India who has bought a health insurance plan can get tax savings under section 80D.