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Health Insurance Tax Benefits

19 May 2022, 4:24 PM

A health insurance plan is one of the most crucial instruments that offers coverage in times of medical emergencies. With a health insurance plan, you can safeguard your and family’s savings. It is better to be safe than sorry, thus whether the medical emergency is unforeseen or planned to have a health insurance plan will make you feel financially secure at all times. Thus, health insurance coverage is not only a safety net but also a financial tool to save tax. In order to encourage people, the importance of a health insurance policy, the Indian government allows individuals to avail tax deductions for the health insurance premium paid. An individual can avail health insurance tax benefits under Section 80D of the Income Tax Act, 1961.

Who can Avail Tax Benefit Under Section 80D?

Section 80D pertains to the health insurance tax benefits. The applicability of this section is available to Hindu Undivided Family and every Individual. The applicability is valid for tax benefit for payment of health insurance premium. For individuals, the tax deduction benefit can be availed not only for themselves but they can avail tax benefit for payment of health insurance premium for a spouse, dependent children or parents as well. Additionally, one of the biggest advantages of this benefit is that it can be availed over the tax deductions available under other sections of the income tax Act i.e. Section 80C/80CCC/80CCD.

Deductions Available Under Section 80D

Individuals can avail tax benefit for themselves as well as their immediate family namely: Spouse, dependent children and Parents. Let us see the quantum of tax deductions under section 80D for Individuals.

  • An individual can avail tax deductions up to INR 25,000 together for self, spouse and dependent children.
  • An individual can avail additional tax deductions up to INR 25,000 for parents aged less than 60 years, however, for parents aged more than 60 years the quantum of the tax deduction is INR 50,000.
  • In the case where both Insured and the parents for whom the health insurance cover is availed are aged more than 60 years then the quantum of the tax deduction is INR 1 Lakh.
ScenarioPremium Amount Paid for Self, Spouse, and Dependent ChildrenPremium Amount Paid for ParentsTax Deductions available under Section 80D
HUF for members less than 60 years of ageINR 25,000 INR 25,000
HUF for members more than 60 years of ageINR 50,000 INR 50,000
Individual taxpayer and Parents both below 60 years of ageINR 25,000INR 25,000INR 50,000
Individual Taxpayer below 60 years of age and Parents above 60 Years of AgeINR 25,000INR 50,000INR 75,000
Individual Taxpayer, Family and Parents all above 60 years of ageINR 50,000INR 50,000INR 1,00,000

Preventive Health Check-up

The cost of health check-up is also entitled to a tax deduction. An individual can health insurance claim a tax deduction for the amount spent for a preventive health check-up. An amount of INR 5,000 can be availed within the overall limit of INR25,000 (for individual, spouse, and dependent children aged below 60 years) or INR 50,000 (for parents aged more than 60 years). The preventive health check-up deduction can be claimed either by the individual, spouse, children, or parents. This deduction can be availed, even if the payment for health check-up is made in cash.

What are the Documents Required for Claiming Tax Deduction?

The following is the list of documents that an individual needs to claim a tax deduction:

  • Premium Paid Receipt
  • Original Insurance copy stating the names of family members, relation with the proposer and age.
  • For premium paid for parents, the proposer should take the 80D certificate from the health insurance provider.

Things to Keep in Mind

  • Kindly refrain from paying a premium in cash
  • The maximum tax deduction that can be availed under section 80D is INR 1 Lakh (when the age of both i.e. the individual taxpayer and parents is above 60 years)
  • Benefits available under section 80D are over and above the deduction available under Section 80C
  • No tax deduction can be availed for the health insurance premium paid for extended family i.e. aunty, uncle, brother, sister, etc.

Conclusion

A health insurance plan offers double benefit i.e. safeguarding yourself from healthcare expenses and availing tax benefits for the premium paid. Thus, a health insurance plan is a beneficial tax planning tool.  

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