Medical Insurance Tax Benefits

Besides protecting you against unexpected healthcare costs, a health insurance policy is a very efficient tax-saving tool. As a health insurance policyholder, you can avail substantial tax benefits under section 80D medical insurance of the Income Tax Act, 1961. This is as per the traditional tax structure.

The premium paid can be claimed as tax deduction of mediclaim under the Income Tax Act, helping you avail health insurance tax benefits. Moreover, the premium paid towards the Health Insurance of your family, including your spouse, children and parents is also eligible for tax exemption under section 80D of the Income Tax Act.

Therefore, buying a Health Insurance policy will not only help you reduce healthcare costs but also help reduce your taxable income. Here, we’ve discussed in detail the several health insurance tax benefits.

Overview of Health Insurance Tax Benefits

Whether you choose Individual Health Insurance or Family Health Insurance, you can enjoy several tax benefits under your policy. The table below gives you a brief on the various health insurance tax benefits you can look forward to when claiming deductions under the old tax regime.

Income Tax Sections

Tax Benefits

Section 80D

  • The provisions under the section 80D of the income tax laws, allow you to avail tax benefits on the premium paid towards Health Insurance for your parents, irrespective of whether your parents are dependent on you or not.

  • You can also avail tax benefits up to Rs. 30,000, including the cost of annual preventive health check-ups, based on the premium payments made for Health Insurance of your parents aged 60 years or above, provided you are below 60 years.

  • In case you are 60 years or above, and you are still paying the premium towards your parent’s Health Insurance, you can avail 80D tax exemption up to Rs. 60,000.

  • The provisions under the income tax laws also allow you to avail tax exemptions up to Rs. 5000 for the preventive health check-ups expenses incurred for your parents who are above 60 years of age.

  • If you are aged 60 years or above, and you pay for the cost of preventive health check-ups of your parents who are 80 years or above, you can avail tax benefits up to Rs. 65,000.

Section 80DD

The healthcare expense incurred for the treatment of a dependent handicap can be claimed as tax deductions up to Rs 50,000 under the section 80DD. Depending on the severity of the disability, the deduction limit under this section can be further extended to Rs 1 Lakh.

Section 80DDB

The healthcare expenses incurred by an individual on the treatment of certain diseases such as haemophilia, neurological disorders, Parkinson’s disease, cancer (malignant), AIDS, thalassemia and chronic renal failure are tax-deductible. The deduction limit under this section extends to be Rs 40,000 (for those aged below 65 years) and Rs 60,000 (for those aged above 65 years).

Section 80U

The healthcare expenses incurred by the policyholder who has a disability can be claimed under Section 80U. To be eligible for claiming tax benefit under this section, the insured should have at least 40 percent disability certified by a medical practitioner. Disabled insured can claim up to Rs. 75,000 and in severe cases up to Rs. 1.25 Lakh.

Now that you’ve got an overview of various tax benefits offered by health insurance plans in India, let us further discuss the tax benefits under Section 80D in detail.

Health Insurance Tax Benefits under Section 80D

  • Tax Deduction on Health Insurance Premiums:

Assume that Mr Iyer recently purchased a health insurance policy that covers himself and his family. He can claim a deduction of mediclaim up to Rs. 25,000 annually for premium instalments. The premium amount can be for himself, his spouse, and dependent children. If he or his spouse is above the age of 60 years (senior citizens), then the limit goes up to Rs. 50,000.

  • Tax Deduction on Preventive Health Checkups:

Elaborating on the above example, Mr Iyer can claim a tax deduction on his annual preventive healthcare checkups as well. The limit is set up to Rs. 5000 in addition to the aforementioned limit (tax deduction of mediclaim for premium instalments).

  • Tax Deductions on Health Insurance Premium for Parents:

Now, let us assume that Mr Iyer is also paying premiums of the health insurance policy for his parents. Because of this, he qualifies for an additional tax deduction. We have discussed the tax deduction limit on health insurance for parents in the article further.

Tax Benefits on Health Insurance for Parents

Here's a brief understanding of the tax benefits available on health insurance plans for parents.

 

You and your parents are below 60 years of age.

You are 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

Rs. 25000 + Rs. 25000

Rs. 25000 + RS. 50000

Rs. 50000 + Rs. 50000

Tax Exemption on Health Check-ups

Rs. 5000

Rs. 5000

Rs. 7000

Total Tax Exemption

Rs. 55000

Rs. 80000

Rs. 1,07,000

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 Rs. 36,000 annually. Additionally, he also pays Rs 28,000 as premium towards his parent’s Health Insurance policy. His parents are more than 80 years of age, and hence they fall under the ‘super senior’ category. Here are the maximum deduction of mediclaim he can avail under Section 80D: -

The maximum Health Insurance tax exemption limit for senior citizens is Rs. 30,000, hence Mr Anand can claim his own Health Insurance premiums as deductions up to Rs. 30,000. Additionally, since his parents are more than 80 years old and fall in the ‘’super senior citizens’’ category he can avail a deduction of up to Rs. 30,000 on their Health Insurance policy. Hence, Mr Anand can claim the entire premium amount, which is Rs. 28,000. Therefore, the total claimable deduction for Mr. Anand will be Rs 58,000 (Rs. 30,000 + Rs. 28,000).

How to Claim Tax Benefits on Health Insurance Premiums

You need to be eligible to avail the 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.

A. Eligibility Criteria

You can avail the tax benefits under Section 80D for health insurance plans purchased:

  1. Either for yourself or your family members.

  2. Your children, spouse and parents.

  3. Any other family member who is dependent on you.

B. Documents Required

To avail the tax benefits under Section 80D mediclaim, 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 to you.

Besides knowing what the health insurance tax benefits are, you also need to know the exclusions under it. We have given an overview of the same below.

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 any tax benefits.

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

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 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, and your children. The premiums paid toward the policy that covers her parents can be claimed for tax deduction under Section 80D.

However, note that deduction of mediclaim 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 tax benefits on the entire family’s income.

The following table will help you understand this better.

 

You and your parents are below 60 years of age.

You are below 60 years of age, and your parents are senior citizens.

You are 60 years or above, and your parents are senior citizens

Health insurance premiums for self and family members (your wife and children)

Rs. 25,000

Rs. 25,000

Rs. 50,000

Health insurance premiums paid by you for your parents.

Rs. 25,000

Rs. 50,000

Rs. 50,000

Health insurance premiums paid by your wife for her parents.

Rs. 25,000

Rs. 50,000

Rs. 50,000

Family’s total tax benefit on health insurance.

Rs. 75,000

Rs. 1.25 Lakhs

Rs. 1.50 Lakhs

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.

  • Try not to pay the health insurance premiums in cash.

  • The health insurance premiums need to be paid in any mode other than cash. However, preventive health checkups can be paid in cash.

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

  • The amount that can be claimed for deduction of mediclaim as senior citizens can also include the medical expenses incurred.

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 difficult 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 correct history with the insurer when buying the health policy. Any discrepancy or mention of false information can lead to claim rejections in the future.

Conclusion

In addition to protecting you and your loved ones against unforeseen medical emergencies, health insurance plans help you save a fortune in tax. Thus, it makes health insurance a beneficial tax-saving tool and a worthy investment for yours and your family’s future.

With a health insurance policy from Finserv MARKETS, you can save more on your taxes. You can also use the health insurance premium calculator to determine the premiums charged on your desired health insurance coverage. Based on the results, you will be a step closer to making an informed decision related to health insurance.

Best Health Insurance Plans Available at Finserv MARKETS

FAQs On Health Insurance Tax Benefits

  • ✔️Can I avail preventive health checkups for tax benefits?

    Yes. You can avail up to Rs. 5000 as tax benefits on preventive health checkups under Section 80D of the Income Tax Act.

  • ✔️I paid my health insurance premiums in cash. Can I avail the tax benefits on my health insurance plan?

    No. If you want to avail tax benefits on your health policy, it is best to pay your health insurance premiums via internet banking, cheque, credit/debit card, or bank demand draft.

  • ✔️Are tax benefits available on health insurance plans that cover relatives other than spouse, children, and parents?

    Ideally, the tax benefits on health insurance can be availed for premiums paid for self, spouse, children, and parents. Premiums paid for any other relative cannot be claimed for tax deductions. You can read more about health insurance tax benefits by visiting Finserv MARKETS. 

  • ✔️Do you avail tax benefits for indemnity plan or fixed benefit plan?

    Health insurance tax benefits can be availed irrespective of the type of policy you purchase.

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