Health insurance is like a protective umbrella that helps you on bad days. The general benefits of a health insurance plan are well-known. However, there’s one benefit that not everyone is aware of. It is the benefit of Tax that comes with buying health insurance. This article will explain the tax benefit of health insurance and how you can use it to your advantage.
Why Do You Need Health Insurance?
Everyone knows that the lifestyle followed by people today is far from ideal. The hustle culture has crept into the overall system and is glorified for the worse. This trend has led to overworked young people with serious mental and emotional stress. Ruined sleep schedules, unhealthy eating, and strainful work environments are significant causes of health deformities in both men and women. Under such circumstances, a health insurance plan is people’s first choice.
With deteriorating health standards, the thing that worsens the situation is the ever-increasing prices of everything. With prices surging to an all-time high for most items, the Tax to be paid also increases yearly. This affects the salaried employees the most. But the good news is that they can save their taxes by claiming a Tax benefit on health insurance.
Saving taxes from many other means is easier for those who understand finances. However, everyone needs to understand finances and find ways to save their money. Claiming a tax health insurance tax benefit redemption in lieu of health insurance tax benefits is one such way.
Let’s dig deep into how one can save money using the Tax benefit on health insurance.
What is the Health Insurance Tax Benefit 80D Income Tax Act?
The Income Tax Act allows you to have health insurance tax benefits on premiums through the tax Section 80D. This means that the premium paid for the health insurance policy is covered under the Income-tax Act, section 80D. The only thing to remember is that only the policy proposer could avail of the health insurance tax benefit 80D.
You can claim the premium deduction for self, family, and dependent parents’ health insurance. The maximum amount you can claim as a deduction is INR 1,00,000 annually. This could be availed on the premiums paid for self (in case of senior citizens) or family plus premiums, for separate health insurance for parents.
Since the health insurance income tax is substantial, it helps in reducing the money outflow for taxes. This is for the financial year for which the Tax is computed. However, the clauses and the health insurance tax benefits are subject to changes in policies regulated by the government.
How Much Health Insurance Tax Benefit 80D can you Claim?
The Income Tax Act covers two types of premium payments to encourage people to buy good health insurance policies and have sufficient health insurance coverage. The first is on the premium for self and family, and the second is on the policy premium for dependent parents. Thus, health insurance tax benefits can be claimed on family health policies and individuals.
Even the citizens categorized under Non-resident Indians (NRI) and Hindu Undivided Family (HUFs) can claim health insurance tax benefits from the policies purchased in India.
This particular tax benefit on health insurance makes it even more desirable. But, apart from this, the health insurance tax benefits increase general people’s awareness about many other ways of reducing taxable income while investing in essential policies like health insurance and life insurance.
Despite the tax benefit on health insurance, most people remain unaware. So here are the details on how many deductions you can get from the health insurance tax benefit 80D.
- The health insurance deduction depends on the proposer’s age or the primary policyholder.
- You can claim up to INR 25,000 under health insurance tax benefits yearly if you are less than 60 years of age.
- You can claim the health insurance tax benefits on an individual or a family floater plan bought by you. Apart from this, you can also claim the tax benefit on health insurance separately for a policy purchased for dependent parents.
- The maximum medical limit for policyholders above 60 years of age is INR 50,000
- The HUF or Hindu Undivided Family can claim a maximum amount of INR 25,000 as tax benefit on health insurance if the individual is below 60 years old. And for individuals above 60 years of age, the maximum limit is INR 50,000.
- Unlike HUF, NRIs or Non-Resident Indians can claim a maximum amount of INR 25,000 as health insurance tax benefits irrespective of age.
- If you don’t meet the aforementioned medical deduction limit, a preventive health check-up can also be incurred, with a maximum cap of INR 5,000
- For the premium paid on the policy for parents below 60 years of age, you can claim additional health insurance tax benefits. Deduction of up to INR 25,000 is allowed. The limit jumps to INR 50,000 if your parents are above 60 years of age.
How you can avail of Health Insurance Tax Benefits in Preventive Health Check-ups
Going for regular health check-ups is considered a good lifestyle habit. Examining your health at the right time is crucial to cure it before any severe damage is caused. Health Insurance tax benefits also include these preventive health check-ups.
You can claim health insurance tax benefits of up to INR 5,000 yearly for the health check-ups of parents below 60. The limit goes to INR 7000 for people above 60 years of age. However, you can only use these allowances only if you fall under the aforementioned health insurance income tax deduction limits.
Let’s take an example of one of the healthcare policies- Tata AIG Medicare Health Insurance. Under this policy, you can claim the expenses for a health check-up if they fall under 1% of the total sum insured. The amount can be up to INR 10,000 per policy. But you can only claim these health insurance tax benefits if you have not claimed them for two years on your policy.
Health Insurance Tax Benefits: A Detailed Table
Below is a table that gives a comprehensive guide on the amount of tax you can save on different policies.
|Health Insurance purchased for||1. Self (below 60 years of age) + family
2. Parents (below 60 years of age)
|1. Self (below 60 years of age) + family
2. Parents (above 60 years of age)
|1. Self (above 60 years of age) + family
2. Parents (above 60 years of age)
|Non-Resident Indians (NRIs)||Hindu Undivided Family (HUF)|
|Preventive Health Checkup claim limit (Self+Family)
|INR 5,000||INR 5,000||INR 7,000||INR 5,000||INR 5,000|
|Preventive Health Checkup claim limit (Parents)||INR 5,000||INR 7,000||INR 7,000||INR 7,000||–|
|Insurance Premium Deduction Under Section 80D (Self+Family)||INR 25,000||INR 25,000||INR 50,000||INR 25,000||INR 25,000|
|Insurance Premium Deduction Under Section 80D (Parents)||INR 25,000||INR 50,000||INR 50,000||INR 50,000||–|
|The Maximum Deductions Available Under Section 80D||₹25,000 + ₹25,000 = ₹50,000||₹25,000 + ₹50,000 = ₹75,000||₹50,000 + ₹50,000 = ₹1,00,000||Either ₹25,000 or ₹50,000||₹25,000|
Health Insurance Tax Benefits: Exclusions
To enjoy the tax benefit on health insurance, the premium should comply with the conditions under section 80D. However, if you do not stick to these conditions, you may not receive the health insurance tax benefits.
Here are a few conditions that make you unsuitable to receive health insurance tax benefit 80D.
- Untimely payment of health insurance premium, i.e., the amount is not paid within the financial year.
- You have paid the premium amount in cash.
- The premium is not paid from the taxable income of the primary policyholder. In other words, if the premium is paid by someone else on your behalf, the tax deductions cannot be claimed.
- The unavailability of the premium payment receipt will also make you ineligible for a tax deduction.
- You have paid a premium for people who are not your immediate family members. For example, the premium paid for siblings, friends, and in-laws will not be included.
- The deduction claim is more than the amount specified in Section 80D. You cannot avail of anything else, even if you have paid more.
Documents Required To Claim Health Insurance Tax Benefits 80D
You can claim the tax benefits on health insurance while filing your ITR (Income Tax Return). Below are the steps you can follow to claim them:
- While filing the ITR, under the “Deductions” column, select 80D.
- Choose the criteria you are looking to claim the tax benefit from. For example, self, self and family, self and parents, Self, Family, and Parents Above 60 years, etc.
- Attach the required documents, which are mainly the receipt of the premium payment. The premium has to be paid through any means other than cash to claim the benefit.
Note: The Income Tax has not specified any particular list of documents required to claim the tax benefits. However, to be absolutely safe, you can save the medical expense bills, medicine invoices, etc.
Things to Remember while Claiming your Health Insurance Tax Benefit 80D
Below are a few things you should remember before claiming the tax benefit on a Health Insurance policy. This will help you understand the tax deduction under section 80D better.
- Investing in Health and life insurance policies is an excellent step in achieving financial independence. The tax benefits on health insurance have great value in your overall financial planning. Both individual and family floater plans can give you health insurance tax benefits.
- You should not pay the health insurance premiums in cash if you want to claim the health insurance tax benefit 80D. As per the Income-tax section 80D, the premiums paid in cash cannot be included in the tax exemption clause. Therefore, you must make sure to pay the premiums through modes like cheques, demand drafts, or any online payment methods.
- Health Insurance premiums should only be paid with the taxable money of the primary policyholder. In other words, if anyone else pays the premium on your behalf, you are not eligible to apply for tax exemptions. Neither the person who paid is eligible for tax redemptions.
- The tax benefit on health insurance can only be claimed on the premium and not on anything else. Additional charges such as GST and service charges are not included. However, if you have paid an additional amount for an add-on critical illness cover, this amount is eligible for a tax deduction.
- Take steps to renew the policy within the financial year.
- You should have documentary proof of the payment and policy renewal to claim the tax benefit on health insurance.
The increasing medical care costs and downgraded lifestyle choices have made it imperative to invest in a suitable health insurance policy. A health insurance policy does more than cover your medical expenses in need of time. It can also save you some extra bucks by claiming your health insurance tax benefit 80D.
Health Insurance Tax Benefits – FAQs
Is it true that anyone with a health insurance policy can claim the tax deduction under Section 80D?
Ans. Yes, the health insurance and health-based riders with life insurance plans are eligible to apply for tax deduction under Section 80D.
Who can get the health insurance tax benefit?
Ans. Anyone who has purchased a:
- Individual Health Insurance Policy
- Family Floater Policy
- Senior citizen health insurance plan for parents
Can claim tax exemption under section 80D. This holds for individual, non-resident Indian, and Hindu Undivided families.
What documents are required to claim the tax deduction as a health insurance tax benefit?
- The full receipt of the premium payment is paid through any means other than cash.
- The date on the receipt should be for the same financial year.