Income Tax

How Senior Citizen Health Insurance Help You Save Tax

Dec 01, 2021
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A well-planned investment in health insurance serves the dual purpose of helping one meet his or her financial goals during a medical emergency as well as save tax on an annual basis. This becomes especially important when the health insurance in question is for a senior citizen who is more prone to medical problems. Interestingly, the tax saving schemes also recognise this and are created in a manner that offers more rebate to senior citizen health insurance policies.

What is Section 80D of the Income Tax Act?

The insurance policy holder, his or her spouse, children and dependant parents can benefit out of Section 80D of the Income Tax Act. Section 80D allows the taxpayer an upper limit of INR 25,000 per annum for claiming deductions for investing in medical insurance. This is for the premium that the taxpayer has to pay toward the medical insurance of oneself, his or her spouse and dependent children. Within the aforesaid limit of INR 25,000, the taxpayer can claim a maximum of INR 5,000 per annum for preventive health check-ups. If the taxpayer is aged 60 years or above, then the limit will be extended to INR 50,000.

How does Section 80D help you save tax?

  1. Tax saving under Section 80D for senior citizens who have health insurance

The tax benefit limits will increase to INR 50,000, if the policy holder or the spouse is more than 60 years in age. One will even get an additional coverage of INR 5,000 for preventive health check-ups. 

       2.Tax saving under Section 80D when your parent is a senior citizen with health insurance

One has the option of availing this benefit for an additional INR 25,000 for his or her parents or guardian. If these beneficiaries happen to be a senior citizen, then the maximum limit will be extended to INR 30,000 (inclusive of INR 5,000 for annual preventive health check-ups).

Super senior citizens can claim up to INR 30,000 every financial year toward medical treatment and check-ups. In case, one of your parents is a super senior citizen and does not have an insurance policy and the other parent is a senior citizen, then you, as the taxpayer, can claim a deduction of INR 30,000 towards medical treatment for either of them.

It is important to remember that deductions under section 80D on health insurance can be bought for one’s parents and not for one’s in-laws. Also, the deduction is available no matter if your parents are financially dependent or not.

Please note: The benefits can only be availed if the payments are not made in cash – they have to be done in the form of online banking, cheque, draft, credit or debit card.

Tax slabs under Section 80D

The tax slabs that can be availed under Section 80D are as follows – 

Covered individuals

Exemption limit

Health check-up included

Total deduction

Self and family 

INR 25,000

INR 5,000

INR 30,000

Self, family and parents

INR 50,000

INR 5,000

INR 55,000

Self, family and senior citizens

INR 55,000

INR 5,000

INR 60,000

Self (senior citizen), family and senior citizen parents

INR 60,000

INR 5,000

INR 65,000

Let us take examples of either of the cases involved to understand how this works. 

Example 1: Dinkar, who is 36 years old, runs a household that consists of his mother aged 65 years, his spouse aged 33 years and one child aged 7 years. He has a family floater health insurance that covers his wife, child and himself and other insurance for his mother. The yearly premium for the former is INR 15,000 and for the latter is INR 20,000. Suresh has also paid INR 15,000 for his check-up and INR 7, 000 for his mother’s annual check-up. 

Expense

Actual expense

Deduction applicable

Health insurance premium under family floater policy

INR 15,000

INR 15,000

Preventive health check-up for self

INR 15,000

INR 5,000

Health insurance premium for senior citizen

INR 20,000

INR 20,000

Preventive health check-up for senior citizen

INR 7,000

INR 5,000

Total deduction available

INR 57,000

INR 45,000

Though Dinkar cannot claim the entire amount as deduction under the Act, he does save upon a significant portion of his income when he makes this claim under Section 80D.

Example 2: Seema, a divorced senior citizen, lives with her father aged 95 years and two dependent children aged 20 and 21 years. She has a family floater health insurance with a yearly premium of INR 27, 000. Her father too has a medical insurance policy with INR 35, 000. She has paid INR 15, 000 for her check-up and INR 7, 000 for her father’s annual check-up. 

Expense

Actual expense

Deduction applicable

Health insurance premium under family floater policy

INR 27,000

INR 27,000

Preventive health check-up for self

INR 15,000

INR 5,000

Health insurance premium for super senior citizen

INR 35,000

INR 30,000

Preventive health check-up for super senior citizen

INR 7,000

INR 5,000

Total deduction available

INR 84,000

INR 67,000

The deduction amount available is higher for Seema is a senior citizen herself and her father is a super senior citizen.

Conclusion 

Purchasing medical insurance is no longer just a risk-guarding measure – it is increasingly becoming a viable investment option and a good tax saving measure. Get a complete understanding of how Section 80D operates with respect to health insurance and use it effectively to save on your taxes.

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