The majority of us purchase a health insurance policy for securing or protecting ourselves and our families in the event of medical emergencies. However, most people are not aware of the fact that a medical insurance policy can also help you save tax. Yes, it does! In this article, we have detailed important information regarding the tax benefits of a health insurance policy.
So, let’s understand the various health insurance tax benefits under section 80D of the Income Tax Act, 1961.
Section 80D, or more usually referred to as deduction under section 80D of the Income Tax Act, 1961, entails tax deductions on your health insurance premiums. Under this section, you can claim a deduction of up to Rs. 55,000 per year for all your paid-up premium installments. The premium you pay should either be for yourself, your spouse, dependent children or parents.
Tax Benefits under Section 80D of the Income Tax
According to the Income Tax laws for the current financial year, there are five essential things to know regarding the tax benefits of health insurance plans.
- Tax is exempted from premiums paid for health insurance for your parents (whether your parents are dependent on you or not).
- Avail tax benefits up to INR 80,000 based on the premiums paid by you towards health insurance for your parents – wherein your parents are senior citizens (60 years or more), and you are below the age of 60 years.
- If your age is 60 years or above and you still pay premiums towards health insurance for your parents, you can avail tax exemption up to INR 1 lakh.
- You avail tax benefits of up to INR 5000 for expenses incurred for health check-ups of your parents who are 60 years of age and above.
- If your age is 60 years or above, and you look after the health check-ups of your parents who are 80 years and above, you are eligible to avail tax benefits of up to INR 1 lakh.
The following table illustrates the tax benefits on health insurance for parents:-
|You and your parents are below 60 years of age||You and below 60 years of age and your parents are senior citizens||You are 60 years or above, and your parents are senior citizens|
|Tax Exemption on Premiums Paid||INR 25000 + INR 25000||INR 25000 + INR 50000||INR 50000 + INR 50000|
|Tax Exemption on Health Check-ups||INR 5000||INR 5000||INR 7000|
|Total Tax Exemption||INR 55000||INR 80000||INR 1,07,000|
Imagine you are a businessman of age 40 years. You purchase two health insurance plans – one for your partner with an annual premium rate INR 12,000 and another one for his mother (age 67 years) with a yearly premium rate INR 18,000. Thus, after calculations, the total deductible amount from your taxable income comes up to INR 30,000 (which is INR 12,000 + INR 18,000).
How does it work?
There are different categories defined in terms of “Persons Covered” when referring to Section 80D of the Income Tax Act, 1961. Following are the types available:
- Self and Family – This means that you can avail tax deduction on the premium paid to cover yourself as well as your spouse and dependent children
- Self and Family + Parents – This implies that on top of availing health insurance tax exemptions for yourself, spouse and dependent children, you can avail deduction under section 80D on the health insurance premium paid by you for your parents as well
- Self and Family + Parents (Senior Citizens) – This is essentially the same as the “Self and family + Parents” category with the difference that the deductible amount increases for senior citizen parents
- Self (Senior Citizen) and Family + Parents – In this category, the deductible benefits increase to INR 1,00,000 in case you and your parents are both senior citizens
Therefore, if you are a family with children or dependent parents, it makes sense to have a family health insurance plan and avail the above mentioned tax benefits.
The following table illustrates the various deduction limits/tax benefits that you can avail on your health insurance policy premium:-
|Self and Family||INR 25,000/-|
|Self and Family + Parents||INR 50,000/-|
|Self and Family + Parents (Senior Citizens)||INR 75,000/-|
|Self (Senior Citizen) and Family + Parents (Senior Citizens)||INR 1,00,000/-|
An important thing to note is that before you avail of a health insurance tax benefit, the premium payment that you make needs to be done either through a credit card or cheque for you to be able to claim a tax deduction.
Also, the health insurance premium that you pay should be from your taxable income for that financial year. So, opting for a higher sum insured not only helps provide a better cover but also helps save a significant amount of tax under section 80D. Also, senior citizens would enjoy higher savings on tax as compared to individuals who are below the age of 65 years. Not just tax benefits, there are several other health insurance benefits you should be aware of to make use of your policy fully.
Health insurance available online on our platform is an easy way to get medical plans for yourself and your family. So, go ahead and buy your health insurance policy online to cover yourself and your family in case of any unforeseen situations!
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