Health insurance tax benefit is one of the most popular tax-saving tools that gives medical expense protection and also saves taxes. To learn more about the benefits keep reading the article.

Health Insurance Tax Benefit

With the onset of coronavirus disease, protecting your health and staying safe has become a necessity. The virus has infected almost 150 million people and has taken more than 3 million lives. India is one of the top 3 most affected countries due to COVID-19. The number of people who have taken health insurance before COVID was just 4%. According to Financial Express the number of people who have taken health insurance after the pandemic has skyrocketed to 55%. Not only do you reap medical benefits, but also health insurance tax benefits through this policy.

Purchasing health insurance gives you triple benefits like;

  • Financial security during medical emergencies.
  • Health insurance tax benefits.
  • Quality medical facilities from reputed medical networks.

Enjoy your health insurance tax benefit under Section 80D if the premium is paid for self, spouse, dependent children and dependant parents.

What Exactly is Section 80D?

Your expenses towards medical insurance premium and preventive health check-up for self, spouse, dependent children and parents can be claimed for tax deduction under section 80D. This policy also applies to Hindu Undivided Family (HUF) to claim a deduction.

Which Investments are applicable under Section 80D?

 Now let us see which type of investments are applicable under Section 80D.

  • The health insurance premium paid and the expenses spent for preventive health checkups can be filed as deductions under Section 80D.
  • The health insurance premium paid for the self, spouse and dependent children can be claimed for deduction under section 80D.
  • The health insurance premium paid for parents can also be claimed under Section 80D. The deductions are based on the age of the policyholder’s parents.
  • Health-based insurance that comes under a term plan like Critical Illness rider cover is also applicable for tax deduction under 80D.

Eligible Candidates for Health Insurance Tax Benefit under 80D:

Candidates eligible for health insurance tax benefits are;

  • Yourself
  • Spouse
  • Dependent children
  • Dependent parents. Both senior and non-senior citizens are applicable.
  • Hindu Undivided Family(HUF)

Payments that are Eligible for Health Insurance Tax Benefit:

Now let us see how you can claim tax deductions under section 80D for a given financial year.

  • The health insurance premium paid for self spouse and dependent children can be claimed under this section which is a maximum of Rs. 25,000 this includes preventive health check-ups wherein a maximum of Rs. 5000 can be claimed.
  • In case you and your spouse are senior citizens this maximum limit is raised to Rs. 50,000.
  • In addition to health insurance premiums paid for self, spouse and dependent children, health insurance premiums paid for parents can also be claimed under section 80D.
  • In case you have taken health insurance for you and your dependant parents then you can claim a tax benefit up to Rs. 25,000 for yourself and Rs.25,000 for your parents. So a total of Rs. 50,000 tax exemption can be claimed.
  •  In case your parents are senior citizens and your family is below 60 years then you can claim a tax benefit up to Rs. 25,000 for you and your family and an additional amount of Rs. 50,000  can be claimed for the premium paid for your parents. So in total Rs. 75,0000 tax exemption can be claimed. Additionally, you can claim a maximum of Rs. 5000 used for health check-ups of parents.
  • So a scenario wherein you can take maximum advantage of this section would be where you or your spouse and your parents are senior citizens and you can claim a tax benefit of INR Rs. 50,000 for health insurance premiums paid for self, spouse and dependent children. And an additional amount of Rs. 50,000 is allowed on premium paid for your parents. So a total of Rs. 1,00,000 tax exemption can be claimed.
  • For Hindu Undivided Family (HUF) claim of up to Rs.25,000 can be availed for the premium paid for you and your family and an additional amount of up to Rs.25,000 for the premium paid for parents can be availed as health insurance tax benefit. So a total of Rs. 50,000 tax exemption can be availed.

Tax Deduction for Annual Healthcare Check-Ups under Section 80D:

Just as the premium paid for health insurance is eligible for tax benefits same way tax benefits can be availed for annual preventive health care check-ups too. The government has taken measures to encourage the citizens to take annual health check-ups to rule out any disease at an early stage.

You can avail of a maximum tax benefit of up to Rs.5,000  for preventive health check-ups and Rs. 7000 for senior citizens under Section 80D. This deduction is within the entire limit of Rs. 25,000 or Rs. 50,000. All your family members, including your spouse, dependent children and parents are eligible for health care check-ups. Note that your siblings are not eligible for the tax deduction preventive health care check-ups.

For example, A person is paying a premium of Rs. 21,000 for health insurance for self, spouse and dependent children. He takes an annual health check-up for himself for Rs. 5000. This person is eligible for a tax deduction of up to Rs. 25,000. So he can avail health insurance tax benefit of Rs. 21,000 and a tax benefit for health check-ups are restricted to Rs. 4000 since the overall deduction cannot exceed Rs. 25,000.

Documents Required to Claim the Tax Deduction under Section 80D:

Documentary evidence is necessary to claim for a tax deduction. It is essential to carry a doctor’s prescription, invoice receipts of consultation fees, diagnostic tests, medical bills etc. Proof of medical expense has to be presented to avail health insurance tax benefits. You will also require a premium payment receipt and an insurance policy copy to claim a deduction for health insurance.

Mode of Payment:

To avail of health insurance tax benefits, the policyholder should pay health insurance premiums through cheque,  online banking, draft, debit or credit card. Payments through cash will not be eligible for tax reduction.

But in the case of preventive health check-ups, the payments can be made through cash. Make sure to keep the medical receipt, doctor consultation receipt, medicine bills, lab test or diagnostic test bills etc. You are required to submit these documents at the time of filing your income tax.

Examples:

Let us understand the tax deductions applicable under Section 80D with different scenarios.

  • Let us assume that Mr Gautam has taken a family floater wherein the annual premium is Rs. 20,000 for self, spouse and dependant children. He has also taken preventive health check-ups which cost him Rs. 8,000. As far as the premium is concerned he can claim the entire amount as it is way below Rs. 25,000. And in case of preventive health check-up out of the Rs. 8,000 he can claim a maximum of Rs. 5000. So Mr Gautam can claim Rs. 20,000 + Rs. 5,000 i.e 25,000 under section 80D for health insurance premium paid towards self, spouse and dependant children.
  • Now let us assume that Mr Giri has a family floater cover for self, spouse and dependant children which cost him around Rs. 35,000. He has also taken preventive health check-ups of himself, his spouse and his dependant children which cost him another Rs. 10,000. So Mr Giri can claim only a maximum of Rs. 25,000 of the premium paid. Since the entire limit has been exhausted this preventive health check-up cannot be claimed.
  • And in case Mr Giri is a senior citizen then this maximum limit of Rs. 25,000 is raised to Rs. 50,000. So in this case he can claim a total of Rs. 35,000 + Rs. 10,000 i.e, Rs. 45,000 as a tax benefit.

How to Avail Tax Deduction under 80D?

  • Businessmen can avail of tax deductions by filing them online.
  • In case of an employee or person who is salaried can file a tax return by submitting certain necessary documents like insurance policy papers and premium payment slips. The documents have to be submitted to the concerned employer.
  • If a company is providing health insurance for their employees and deduct it from their salaries then it is not applicable for a tax deduction. In such a case the person can gain health insurance tax benefit only if he/she pays for their insurance premium themselves or their family members apart from the health insurance provided by the company.

Health Insurance Tax Benefits for Single Premium Payers:

If a person has made a one-time premium payment for the health insurance policy in a single year, but which is valid for more than one year, then he can claim for a tax deduction based on a fraction of the amount. The fraction of the amount is the lumpsum amount paid divided by the number of years the policy is valid. The tax can be claimed for the premium paid of up to Rs.25,000 or Rs.50,000 based on the criteria.

Key Points to be Noted while Claiming for Deduction under Section 80D:

  1. If the premium is paid partly by you and partly by your parent, then both can claim for tax deduction to the extent of the payment made.
  2. The deduction does not include the Service tax and Cess portion from the premium amount.
  3. If an organisation or firm gets group health insurance for their employees then it is not eligible for a tax deduction.
  4. The health insurance tax benefit is not applicable for siblings, grandparents, uncles, aunts or any relatives.
  5. The health insurance tax benefit is not applicable for non-dependant or employed children.
  6. Health insurance tax benefits can be availed if your dependant children are below 18 years of age and unemployed. But if the male child is unemployed he can be covered up to age 25 years and for the female child if she is unemployed she can be covered until she is married.
  7. Read the tax exemption in your policy thoroughly before purchasing the health insurance.
  8. To avail of tax deduction, the mode of payment should not be made in cash.
  9. You can avail of tax exemptions for multiple health insurance policies provided you meet all the eligibility criteria mentioned above.

To Wrap Up!

Purchase a suitable health insurance plan and reap health insurance tax benefits under Section 80D. Health insurance not only safeguards your family from huge medical expenses but also serves as a tax-saving tool. Though the tax-saving option is beneficial it should only be considered as an added advantage but not the sole purpose of buying health insurance. Read all the terms and conditions of the policy thoroughly before purchasing a policy.

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Prateek Mahesh

Prateek has 17+ years of experience writing in Investment Strategy and Sales for Life Insurance. He has done MBA in Insurance and Investment.

Their aim is to educate people on various insurance topics so that they can make wise decisions.

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