Health Insurance Tax Benefits Under Section 80D

The health insurance sector in India has witnessed rapid progress in the past few years. People have finally realized the significance of health insurance in their lives. And why not? Health insurance is the massive financial and emotional support that one hopes for at the time of an unfortunate medical emergency.

When you purchase a health insurance policy, you gain benefits such as protection from unexpected, high medical costs, uninterrupted medical coverage, superior financial stability, freedom from stress at the last moment, and more. Not to forget, you also gain the eligibility for a tax deduction.

Also Read: How to Choose the Right Health Insurance Plan for Parents in India

Tax Benefits on Health Insurance Policy

Health insurance is referred to as a major tax-saving tool. It is because having a health insurance policy by side makes an insured individual entitled to a substantial tax deduction on premiums made for health insurance, under Section 80D of Income Tax Act, 1961.

In other words, the Section 80D of the Income Tax Act, 1961, allows you to avail tax deduction on the basis of premiums paid for one or more health insurance policies purchased for self, spouse, dependent children, and parents (not necessary to be dependent). An important thing to note here is that you cannot claim deduction under Section 80D on health insurance bought for parents-in-law.

Income Tax Deductions and It’s Types in India

Premium Paid for Health Insurance for Self and Family

Under Section 80D of the Income Tax Act, you can claim a tax deduction up to Rs. 25,000 annually, subject to premium for a health insurance policy availed for the protection of self, your spouse as well as dependent children. An additional deduction for insurance of parents is available up to Rs. 25,000, if they are less than 60 years of age.

If parents are senior citizens (above 60 years of age), the limit tax benefits increase up to Rs. 50,000.  In case, the taxpayer, as well as the parent for whom the health cover has been taken, are senior citizens, the maximum deduction that can be availed under Section 80D is up to Rs. 1 Lakh.  If you and your spouse are above 60 years of age, then you can avail tax benefits up to Rs. 50,000.

Premium Paid for Health Insurance for Parents

Under Section 80D of the Income Tax Act, you can claim an additional deduction up to Rs. 50,000 annually, if your parents are senior citizens (above the age of 60 years). In other words, you can save up to Rs. 75,000 on securing the health of self and family below 60 years of age and parents above 60 years of age.

Preventive Health Check-ups

Under Section 80D of the Income Tax Act, you can avail tax deduction for any expenses incurred on preventive health check-ups. An amount of Rs. 5,000 can be availed for medical costs incurred on preventive health check-ups for self, spouse, children or parents. Please note that the tax deduction for premium payment is in addition to deduction available on premium payment. This particular deduction can be claimed either by the individual for himself, spouse, dependent children or parents. Lastly, the payment for preventive health check-up can be made in cash.

Premium Paid by HUF 

A HUF or Hindu Undivided Family can claim a tax deduction under Section 80D of the Income Tax Act for a mediclaim taken for any of the members of the HUF. In case, the member is less than 60 years of age, the deduction amount will be Rs. 25,000. In case, the insured is 60 years of age or more, the deduction amount will be Rs.30,000.

Tax Benefit of Health Insurance Under Section 80D – The Exclusions

Premium Payment Mode

It is important to note that to avail tax benefits under Section 80D, only the taxpayer and no other third-party must pay health insurance premiums. Also, taxpayers are not eligible for tax benefits for paying health insurance premiums in cash. To become eligible for tax benefits and avail them, the premium of the health insurance policy should be made through banking modes such as cheque, demand draft, net banking or debit/credit cards. However, in the case of preventive health check-ups, cash payment is allowed and ideal for saving tax.

Group Health Insurance Policy 

You cannot avail tax benefits under Section 80D for group health insurance policies. Still, if a tax payer wants to make extra premium payments so as to enhance the group cover, he or she may claim a deduction for the extra amount paid.

  • Service Tax

You, as a taxpayer, are not eligible to receive tax benefits on Service Tax and Cess charges levied on the payment of a health insurance policy premium. Service tax is chargeable on payments made for health insurance policy premiums. Note that an amount of 14% of service tax is payable on health insurance premium payments.

Having said that, are you ready to invest in a health insurance policy? Do remember to keep a few things in mind before going ahead with the purchase.

5 Tips to Choose a Health Insurance Plan in India

  1. You should not buy health insurance solely for the purpose of saving tax. Health insurance policy purchase should be done to minimize financial stress at times of unfortunate medical emergencies.
  2. Before you buy health insurance, make sure you avail advice from a registered/qualified financial planner as well as health insurance experts to make the ideal choice.
  3. It is advisable to purchase a health insurance policy with a large sum insured amount instead of buying two policies with a smaller sum insured.
  4. If you want to make an ideal health insurance decision, ask your spouse to purchase a health insurance policy with maximum coverage for self and family, including parents.
  5. To maximize tax benefits and minimize the tax liability of the family, you or your spouse can purchase a health insurance policy only for their parents.

Also Read: Your Health Insurance Claim Got Denied? Here’s What You Need to Do

Final Words

Medical emergencies take anyone by surprise. Therefore, it is best to be prepared with a health insurance policy that covers you all the financial needs at the trying time.

So, choose a suitable health insurance policy today to not only gain a helping hand for future purposes, but also to save a significant amount through tax benefits only to invest in other sectors to gain maximum benefits. If in need of any health insurance help, let the experts know in below comments section.

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About FinanceGAB

Ajeet Sharma is a financial blogger and I am blogging since 2017. Financegab is a personal blog dedicated to personal finance. The main aim of this blog to help people to make well-informed financial decisions.
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