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Tax Benefits in Health Insurance

By Finserv MARKETS - Jul 4,2020
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Medical Insurance Tax Benefits

A sudden medical contingency can put emotional strain on you and your loved ones. During such challenging times, the absence of adequate health insurance can throw your family in financial turmoil. Therefore, it is highly recommended buying a health insurance plan, especially in today’s time.

Besides covering the expenses of a sudden medical contingency, a health insurance plan also helps you save tax. In this section, we have discussed the health insurance tax benefits. Take a look!

Health Insurance Tax Benefits

Health insurance plans in India provide significant tax benefits under Section 80D, or more usually referred to as deduction under section 80D of the Income Tax Act, 1961. It entails tax deductions on your health insurance premiums. Under this section, you can claim a deduction of up to Rs. 50,000 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.

  1. Tax is exempted from premiums paid for health insurance for your parents (whether your parents are dependent on you or not).

  2. 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.

  3. 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.

  4. 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.

  5. 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

Illustration

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 Health Insurance Tax Benefit 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:

  1. Self and Family –

This means that you can avail income tax deduction on the premium paid to cover yourself as well as your spouse and dependent children

  1. 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

  1. 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

  1. 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/-

What Documents Do I Need To Claim The Deduction?

The document you will need to claim the deduction is your health insurance premium payment receipt and your insurance paperwork. Make sure that the health insurance policy enlists the members covered under it, their relation to the master policyholder (that is you), and their age. In case you are paying health insurance premiums for your parents, then ask for an 80D certificate from the insurer.

Factors to Consider When Buying Health Insurance

It is imperative to take into account the following factors when buying health insurance in India.

  • Know Your Requirements:

Before you buy health insurance, evaluate yours and your family’s medical needs. It will help you understand the sum insured you should opt when buying the health policy. Moreover, it is wise to get a medical checkup done to understand yours and your family’s current health condition. Based on the medical reports, you will be able to determine the coverage amount that will suffice in the future.

  • Choose A Lifelong Health Plan:

The health insurance plan you buy should cover you and your loved ones for their entire life. If you are looking to buy health insurance for your parents, consider purchasing the policy before they turn 69 years old, as it gets different to get a health plan with a reasonable premium rate after that age.

  • Make Sure That You Declare Your Current Health Condition:

It is necessary to share yours and your family’s health history with the insurer when buying the health policy. Any discrepancy or mention of false information can lead to claim rejections in the future.

  • Prerequisites for Section 80D:

Besides Section 80, two sub-sections under it can help you save tax.

    • Section 80DD: If any person takes the financial liability of their dependent, the tax deduction amount is extended up to Rs. 50,000. In extreme cases, the limit is extended up to Rs. 1 Lakh.

    • Section 80DDB: For the treatment of specific diseases, the tax deduction is up to Rs. 40,000 (for people below 60 years old) and up to Rs. 1 Lakh (for people above 60 years old). The diseases covered under Section 80DDB are cancer (malignant), AIDS, neurological ailments, Parkinson’s disease, haemophilia, thalassaemia, and chronic renal failure.

Significant Points to Remember

A few things to note before you avail of a health insurance tax benefit are as follows –

  • The premium payment that you make needs to be done either through a credit card or through cheque for you to be able to claim a tax deduction.

  • 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.

  • 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.

Conclusion

Besides securing you and your family in case of medical emergencies, health insurance is a beneficial tax-saving tool as well.

Health insurance plans available on Finserv MARKETS is the easy way to secure yours and your family’s future. You can benefit from features such as cashless claim settlement, reinstatement benefit, tax benefit, extensive coverage, hassle-free renewals, and more.

Moreover, you can go on to buy health insurance of your choice with our Health Insurance App. Further, read our top blogs to know more about health insurance in India:

Finserv MARKETS, a subsidiary of Bajaj Finserv, is a one-stop digital marketplace that has been created for consumers on the go. It offers 500+ financial and lifestyle products, all at one place. At Finserv MARKETS, we understand that every individual is different. And that’s why we have invested in creating a proposition – Offers You Value. A value proposition that ensures you get offers which are tailor made for you. We also offer an amazing product range and unique set of online offers across Loans, Insurance, Investment, Payments and an exclusive EMI store. Be it in helping you achieve your financial life goals or offering you the latest gadgets, we strive to offer what you are looking for. From simple and fast loan application processes to seamless and hassle-free claim-settlements, from no cost EMIs to 4 hours product delivery, we works towards fulfilling all your personal and financial needs. What’s more! Now enjoy the same benefits in just one click with our Finserv MARKETS App.

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