Health Insurance Tax Benefits

Health insurance tax benefits refer to the income tax deduction available on premiums. According to Section 80D of the Income Tax Act, 1961, the premium amount paid towards your policy qualifies for tax benefits. If you, your spouse, children, and parents are covered under the insurance, you can claim these benefits. This can help reduce your taxable income, up to the specified limit. The income tax deduction for health insurance varies based on age, so here’s a look into the details.

A health insurance plan purchased for parents, too, qualifies for the Section 80D exemption. The maximum deduction for non-senior-citizen parents is ₹25,000, whereas, for senior-citizen parents, it is ₹50,000. Here's a brief understanding of the tax benefits health insurance plans for parents.

Consider the following example to understand how health insurance tax benefits work:

Mr. Anand is 62 years old and has purchased a health insurance policy, for which he pays a premium of ₹36,000 annually. Additionally, he also pays ₹28,000 as a premium for his parent’s health insurance plan. His parents are more than 80 years of age, and hence they fall under the ‘super senior’ category.

The maximum health insurance tax benefit limit for senior citizens is ₹50,000, hence, Anand can claim ₹36,000 as deductions against his health insurance premium. Furthermore, since his parents are more than 80 years old and fall in the ‘super senior citizens’ category, he can avail an additional deduction of up to ₹50,000 on their health insurance policy. This means that Anand can claim the entire premium amount, which is ₹28,000. Therefore, the total claimable deduction or the health insurance tax benefits for Anand will be ₹64,000 (₹36,000 + ₹28,000).

Assume you buy a family floater plan for yourself, your spouse, and your kids for a premium of ₹15,000. You have also paid the yearly medical insurance premium of ₹35,000 for your parents. Additionally, you have paid ₹15,000 (family) and ₹10,000 (parents) for the preventive health checkup. 

The following table will help you understand the maximum claimable deduction amount for the above example:

As a policyholder, you can also get health insurance tax benefits against expenses incurred on preventive health checkups. The government introduced health insurance tax benefits to encourage everyone to get preventive medical screening done at regular intervals. This deduction can be availed on preventive health checkups of self, spouse, dependent children, and parents.

Elaborating on the above example, you can claim health insurance tax benefits on his annual preventive healthcare checkups as well. The health insurance tax benefit limit is set up to ₹5,000 in addition to the aforementioned limit (tax deduction on health insurance premiums).

To avail of health insurance tax benefits under Section 80D, you must pay health insurance premiums via non-cash payment modes. You can choose payment methods like a debit/credit card, UPI, cheque, demand draft, etc. However, when it comes to preventive health checkups, you can pay in cash. 

Super senior citizens, i.e. people who are 80 and above, are also covered under Section 80D of the Income Tax Act. This section states that super senior citizens can also claim health insurance tax benefits of up to ₹50,000 towards treatments and medical checkups even if they do not have health insurance. Here’s an example to help you understand the concept better:

You are 60 years old and have paid a medical insurance premium of ₹28,000 for yourself and your dependents. Moreover, you have also paid ₹40,000 for your parents’ medical checkups who are super senior citizens. So, as per Section 80D of the Income Tax Act, you can avail of health insurance tax benefits of ₹68,000. Here’s how:

• Health insurance tax benefits of ₹28,000 on the medical insurance premium paid for yourself and your dependents.

• Health insurance tax benefits of ₹40,000 for your parents (who are over 80 years of age) medical checkups.

Super senior citizens, i.e. people who are 80 and above, are also covered under Section 80D of the Income Tax Act. This section states that super senior citizens can also claim health insurance tax benefits of up to ₹50,000 towards treatments and medical checkups even if they do not have health insurance. Here’s an example to help you understand the concept better:

You are 60 years old and have paid a medical insurance premium of ₹28,000 for yourself and your dependents. Moreover, you have also paid ₹40,000 for your parents’ medical checkups who are super senior citizens. So, as per Section 80D of the Income Tax Act, you can avail of health insurance tax benefits of ₹68,000. Here’s how:

• Health insurance tax benefits of ₹28,000 on the medical insurance premium paid for yourself and your dependents.

• Health insurance tax benefits of ₹40,000 for your parents’ (who are over 80 years of age) medical checkups.

Section 80D of the Income Tax Act is often confused with Section 80C, which also offers tax benefits. However, the limit stipulated under Section 80C is higher than that mentioned in Section 80D. While Section 80C provides health insurance tax benefits of up to ₹1.5 Lakhs, Section 80D offers health insurance tax benefits of up to ₹1 Lakh.

Moreover, Section 80C encompasses investments made in various financial products such as small-savings schemes, ULIPs, life insurance, mutual funds, among others. In contrast, Section 80D is exclusively dedicated to providing health insurance tax benefits on health insurance premiums.

The following are the exclusions under Section 80D of the Income Tax Act:

• Group health insurance plans are not eligible to avail of any health insurance tax benefits

• The premiums of the health insurance plan paid in cash do not qualify for health insurance tax benefits under Section 80D.

You need to be eligible to avail health insurance tax benefits. Here are the eligibility criteria and documents required, which can allow you to claim tax benefits on your health insurance plan.

• Eligibility Criteria: You can avail the medical insurance tax benefit or medical tax benefit under Section 80D for health insurance plans purchased for:

  -Yourself

  -Your children, spouse, and parents

• Documents Required: To avail Section 80D health insurance tax benefits, you will need the premium payment receipt and a policy copy. This should show the name and age of the family members as well as their relationship with you.

In most Indian families, both spouses are earning members. If your scenario is similar, you can ask your spouse to buy a health insurance policy for their parents to avail health insurance tax benefits under it. That way, they can reduce the family’s overall taxable income.

However, note that the deduction of mediclaim policy under Section 80D cannot be claimed for parents-in-law. So, having separate health insurance plans for your respective parents will allow you to maximise the health insurance tax benefits on the entire family’s income.

The following table will help you understand health insurance tax benefits better:

Here are a few essential pointers that may come in handy when availing health insurance tax benefits:

• Know the tax exemptions in your health insurance policy.

• The health insurance premiums need to be paid in any mode other than cash if you wish to claim health insurance tax benefits. However, preventive health checkups can be paid in cash.

• The health insurance tax benefits under Section 80D are in addition to benefits under Section 80C.

Documentation plays an important role when you need to claim against the premium you have paid. Generally, the documents needed to claim medical insurance tax benefits under section 80D include the payment receipt along with the date of the financial year for which the claim is being made.

Make sure you keep the following pointers in mind when you want to claim health insurance tax benefits:

• Receipt of the premium payment of the policy. You can also use the online receipt that you have downloaded from the insurance company's website. 

• The receipt is necessary to be within the given financial year. It should mention the date, the amount, and the mode of payment received for the premium.

• You need to keep in mind that the cash received for the payment of the premium deduction won’t be accepted for tax benefits. 

• Additionally, any temporary receipt provided by the agents will also not be claimed for any kind of health insurance tax benefits.

Health Insurance Plans Available at Bajaj Markets