Health Insurance Tax Benefits

Health Insurance Tax Exemption Under Section 80D

Health insurance is one of the most beneficial financial instruments. Along with protecting you against unexpected healthcare costs, it also acts as an efficient tax-saving tool. According to Section 80D of the Income Tax Act, 1961, you can claim tax benefits of health insurance against your health insurance premiums. Moreover, the premiums paid towards the health insurance of your family, including your spouse, children, and parents are also eligible for tax exemption under Section 80D. 

Whether you buy an individual health insurance plan, family floater plan, or top-up plan, you can avail of the Section 80D tax exemption. Here’s how Section 80D of the Income Tax Act, 1961, offers medical insurance tax benefits on the premium that is paid.

Note: Income tax deductions shouldn’t be your motivation to purchase health insurance. While you must claim tax benefits of health insurance, we shouldn’t lose sight of the fact that health insurance is like a financial cushion, we can fall back on it during medical emergencies.

Tax Deductions on Health Insurance Premium for Parents

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, Mr. 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. Hence, Mr Anand can claim the entire premium amount, which is ₹28,000. Therefore, the total claimable deduction or the health insurance tax benefits for Mr Anand will be ₹64,000 (₹36,000 + ₹28,000).

How Much Tax Deduction Can You Avail Under Section 80D of the Income Tax Act, 1961

Let us assume that you are a family of 6. Your family consists of:

•  Yourself (36)

• Spouse (33)

• Son (9)

• Daughter (7)

• Mother (58), and 

• Father (65)

You buy a family floater plan for yourself, your spouse, and your kids for a premium of ₹15,000. You 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:

Deduction on Preventive Healthcare Check-Ups Under Section 80D

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, Mr. Iyer 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).

No Tax Benefits on Cash Payment

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. 

Deduction Under Section 80D of the Income Tax Act, 1961

As per Section 80D of the Income Tax Act, you can claim health insurance tax benefits of up to ₹25,000 against your health insurance premium. This deduction limit is applicable on premiums paid for self, spouse, and dependent children. In case you and/or your spouse are senior citizens, health insurance tax benefits under Section 80D can go up to ₹50,000.

For example, Mr. Iyer recently purchased a health insurance policy that covers himself and his family (wife and dependent children). He can claim health insurance tax benefits for up to ₹25,000 annually for premium instalments. However, if he or his spouse is above the age of 60 years (senior citizens), then the limit goes up to ₹50,000.

Deduction Under Section 80D for Super Senior Citizens:

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.

Difference between Section 80D and Section 80C

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

Additionally, Section 80C includes investments made in financial products like small-savings schemes, ULIPs, life insurance, mutual funds, etc. On the other hand, Section 80D is dedicated to health insurance tax benefits on the health insurance premiums.

Health Insurance Tax Benefits Under Section 80D - Exclusions

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.

How to Claim Tax Benefits on Health Insurance Premiums?

You need to be eligible to avail health insurance tax benefits. Therefore, we have put together the eligibility criteria and documents required, which will 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:

1. Yourself

2. Your children, spouse, and parents

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

How to Maximise Tax Benefits on the Entire Family’s Income?

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.

For instance, if your wife is a working professional, she can buy a health insurance plan for her parents. Besides, you will have a health insurance plan that covers you, your wife, your children, and your parents. The premiums paid towards the policy that covers her parents can be claimed for health insurance tax benefits under Section 80D.

However, note that 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:

Tips to Avail Health Insurance Tax Benefits

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.

Documents Required to Claim Medical Insurance Tax Benefits under Section 80D

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

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