With the rising cost of healthcare, a rapidly increasing number of individuals are looking to invest in feasible health insurance policies. The primary objective of such policies is to see you through medical emergencies without having you fretting too much over costs. However, there are also certain tax benefits accrued to taxpayers who invest in health insurance, as provisioned under section 80D of the Income Tax Act, 1961.*
* Tax benefit is subject to change in tax laws
What is section 80D?
Section 80D allows a taxpayer to avail of certain deductions from their taxable income instead of the premium paid towards their medical insurance plan. The deduction is also applicable for payments made towards top-up health plans and critical illness insurance. Under this section, Income Tax deductions can be claimed for medical insurance paid by self, spouse, children, or dependent parents. A Hindu Undivided Family (HUF) can also claim IT deductions under this section, related to health insurance.*
* Tax benefit is subject to change in tax laws
Payments eligible under section 80D
A taxpayer can claim a deduction under section 80D for an insurance premium paid for self, spouse, children, and dependent parents, provided such a payment is not made in cash. Payments made for preventive annual health check-ups and medical expenses for senior citizens, along with payments made towards health schemes of the central government, are also eligible for deductions.*
* Tax benefit is subject to change in tax laws
Maximum deductions allowed under section 80D
The maximum deduction allowed for a taxpayer on health insurance premium paid for self, spouse, or children, is Rs.25,000 per year if the taxpayer is less than 60 years of age. If the taxpayer is over 60, the maximum deduction allowed is Rs. 50,000.*
In the case of the health insurance premium paid for parents, the maximum deduction allowed is Rs. 25,000 if the parent is less than 60 years old and Rs 50,000 in case the parent is over 60.*
If the policyholder and their parents both happen to be above 60 years of age, the maximum deduction allowed is Rs. 50, 000 each. *
If the policyholder and their family fall under the HUF category, they are entitled to a maximum deduction of Rs. 25,000. The same applies to NRIs as well. *
* Tax benefit is subject to change in tax laws
Additional deductions
Apart from the aforesaid, a taxpayer can claim a deduction of Rs. 5,000 per year against expenses incurred on health check-ups. The deductions for the check-ups will fall under the limit of either Rs. 25,000 or Rs. 50,000, depending on the age limits. The limit is inclusive of check-up expenses incurred for self, spouse, children and dependent parents. In the case of preventive health check-ups, payments made in cash are eligible for deductions.*
* Tax benefit is subject to change in tax laws
Claim against medical expenses
This provision has been included for the benefit of senior citizens over 60 years of age, who may or may not be covered by a health insurance policy. Medical expenditure incurred by a senior citizen for themselves or their family members who are not covered by any medical health insurance policy, are eligible for deduction under section 80D. Medical bills paid by an individual for their parent who is a senior citizen and not covered by any medical health insurance policy, are also eligible for deduction consideration.*
A maximum limit of Rs.50,000 is allowed to be deducted on account of medical expenses incurred for dependent senior citizen parents, or by senior citizens for themselves and their family members, including spouse, children, and dependent parents.*
* Tax benefit is subject to change in tax laws
The exclusions
There are, however, some exclusions to the eligibility criteria under section 80D. For instance, if the children of a taxpayer are not dependent on him/her, the taxpayer cannot claim deductions on their health insurance cover. The individual can, however, claim the benefit of deduction in the case of spouse or parents, even if the spouse or parent is not a dependent.*
More importantly, if the premium for health insurance is paid in cash, tax benefits cannot be claimed. For claiming tax benefits, the premium had to be paid by cheque, internet banking or credit/debit card.*
Thus, on one hand, health insurance provides financial security against medical contingencies, and on the other, it offers tax benefits. This dual advantage makes it a must-have addition to your financial portfolio. For more information on health insurance and section 80D, log in to a trusted insurer’s website, such as Bajaj Allianz General Insurance Company and other similar companies.*
* Tax benefit is subject to change in tax laws
Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms and conditions, please read sales brochure/policy wording carefully before concluding a sale.
