Health Insurance Tax Benefits

Wondering how to increase your take-home income? Well, one way is to buy health insurance. With this, you can not only save on medical bills but tax as well. But are you aware of how tax benefits on health insurance work out? If not, read the post and find out how the government encourages you to buy health insurance. As per the prevalent income tax laws under Section 80D, you can avail of a tax deduction that can increase your take-home income. For more information on the health insurance tax benefit, read this post further.

Who is Eligible for the Section 80D Health Insurance Tax Benefit?

As per the Income Tax Act, every individual or Hindu United Family (HUF) can claim the health insurance tax benefit under Section 80D from their annual income tax payment in a financial year. Not only does this give you the advantage of purchasing a health insurance plan for yourself, but it also helps you buy the policy that covers your spouse and the dependent children or parents. And the plus point is that, it is over and above the deductions claimed under section 80C/CCC/CCD.

Quantum of Health Insurance Tax Benefit Under Section 80D

According to the law, an individual can claim a deduction of up to INR 25,000 for the insurance of self, spouse, and dependent children. Whereas an additional deduction for the insurance of parents is available up to INR 25,000 if their age is less than 60 years, or INR 50,000) if their age is above 60 years. In case both the taxpayer and parent for whom the medical covers have been taken are aged above 60 years, the maximum deduction under section 80D would be INR 1,00,000. Check out the table below to know the quantum of deduction available to an individual taxpayer under different scenarios:

Savings from Health Insurance Tax Benefit

In a health insurance policy, senior citizens are also included. For instance, Madhur is 45 years old, his father is 75 years old. Madhur borrows a medical cover for himself and his father for which Madhur pays an insurance premium of INR 30,000 and INR 35,000 respectively. Here, Madhur can claim up to INR 25,000 under section 80D, for the paid premium in his policy. Madhur’s father is a senior citizen for whom he took insurance. For this, Madhur can claim up to INR.50,000. In this case, the health insurance tax benefit is INR 25,000 and INR 35,000. Therefore, Madhur gets a total deduction of INR 60,000.

Similarly, a HUF can claim a deduction for health insurance for any of its members. In this, the deduction will be INR 25,000 (if the member is less than 60 years), and INR 30,000 (if the insured is 60 years or more).

The actual savings due to health insurance tax benefits would vary depending on the premium you pay and the policy you buy. There are several types of health insurance policies in India that you could take.

Things to Know If you are Buying a Health Insurance 

As per the Insurance Regulatory and Development Authority (IRDAI), you can only claim the health insurance tax benefit by fulfilling the below-mentioned conditions.

1. Premium Payment should be made by any method other than cash
2. Senior citizens are the individual residents in India whose age is 60 years or more during the relevant financial year of health insurance tax benefit claim.
3. The paid premium for a brother, sister, grandparents, aunts, uncles, or any other relative is unclaimable for a health insurance tax benefit.
4. If the policy premiums are paid on behalf of working children, the tax benefit can’t be taken.
5. If you and a parent do part-payment for health insurance, both of you are eligible for a claim deduction to the extent paid by each.
6. Your tax deduction is taken without showing the Service Tax and Cess portion from the health insurance premium amount.
7. Group Health Insurance premiums aren’t eligible for a health insurance tax benefit.

 Choice of policies for Health Insurance Tax Benefit

Health insurance targets different healthcare-related needs. Different types of health policies come with health insurance tax benefits under Section 80D which adds to the savings for you. With this feature, you can take advantage of the financial impact of medical expenses and also save tax out of it. Check out the types of health insurance policies available in India –

1. Personal Accident: This health insurance policy covers hospitalization in the event of an accident, including death as well as disability due to accident.
2. Individual: This is a basic health insurance policy that covers the hospitalization expenses of individuals only. In this, the premium of a policy depends on the age and gender of the insured person.
3. Family Floater: This is health insurance where you can include family members. The insurance cover is shared among the family members. However, the combined claim amount in such a policy is limited to the sum assured. So, if your sum assured amount is INR 5 lakh, and there are two claims in a year by the couple for INR 4 lakh and INR 2 lakh; the policy would pay for a total of INR 5 lakh only.
4. Senior Citizens: A policy for senior citizens or individuals above the age of 60 years, offers financial cover against health issues should they arise.
5. Surgery and Critical Illness: This is a health insurance policy add-on that addresses rising critical illnesses and surgeries.  It is meant for specific illnesses and surgeries that may vary from policy to policy.
6. Top-up and Super Top-up: A policy that supplements existing basic health insurance plans on which you can take a basic cover up to the deductible level.
7. Indemnity Health Policies: These health insurance do not pay towards any medical treatment and instead payout a fixed sum, as mentioned in the policy contract, in case a claim arises.

Your choice of health insurance policy can help you access financial cover against complex and health-related risks. If one opts for a smart combination, he/she can get both the health insurance and tax benefits to aid his/her savings. However, if needed, you can consult an adviser who can help you understand the health insurance combination.