Health Insurance Tax Benefits

How To Claim Health Insurance Tax Benefits Under Section 80D

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Health insurance is an essential instrument to get access to high-quality medical treatments without exhausting your savings. However, protection from financial loss arising from expensive medical expenses is not the only benefit of health insurance. Taxpayers can also get income tax deductions due to the health insurance tax benefits as guaranteed by section 80D of the Income Tax Act. The Income Tax Act, 1961 considers health insurance an investment and extends tax deductions to health insurance plans. 

The premium paid for the health insurance policy is considered for tax deduction under 80D. Health insurance tax benefit is that the taxable income is reduced based on the premium paid for the policy. 

Eligibility for Health Insurance Tax Benefits

  • Health insurance income tax benefits under 80D can be claimed if you purchase a health insurance policy for your spouse or dependent children. In addition, you can claim tax benefits if you pay a health insurance premium on behalf of your parents.
  • Health insurance tax benefits under section 80D can be availed on various types of health insurance plans such as individual health insurance, family floater plans, critical illness plans, and senior citizen plans. Tax benefits are also granted for preventive health check-ups.

An important requirement to avail of Health Insurance Income Tax Benefits is to pay the premium through cheque, credit/debit card, or net banking. Premium paid in cash is not eligible for income tax deduction under 80D.

Extent of Tax Deductions Under 80D Under Various Circumstances

Health insurance tax benefits are dynamic, with different scenarios having various limits of tax exemptions. It chiefly depends upon the age of the policyholder and the people covered under the policy.

Tax Deductions and Benefits Under Section 80D

Private health insurance tax benefits have a limit of Rs. 25,000 for premiums made for policies for self and dependents such as spouse and children. The taxpayer can claim an additional tax benefit of Rs. 25,000 in case they pay the premium for the health insurance of parents as well. Thus, the total deduction that you get if you are paying the premium for your parents’ health insurance and the premium for the policy belonging to you and your spouse/children is Rs. 50,000. The additional amount is a health insurance tax benefit for parents.

Health insurance tax benefits for parents also depend upon the age of the parents. If you are a taxpayer paying a premium for your health insurance policy and spouse and dependent children, you get a tax deduction of Rs. 25,000. In addition, if you are also paying the health insurance premium on behalf of your parents who are aged 60 and above, you will get extra tax benefit amounting to Rs. 50,000. Thus, in the case of senior citizen parents, the taxpayer gets a total deduction of Rs. 75,000.

Health insurance tax benefit for parents is capped at Rs. 50,000. However, a taxpayer who comes under the senior citizen category themself is also eligible for a tax benefit of Rs. 50,000 in addition to Rs. 50,000 deduction on premium paid for the health insurance of senior citizen parents. Thus, in such a case, the taxpayer gets a total deduction of Rs. 100,000.

If the premium amount has been paid jointly by you and your parents, both of you can claim the deduction as per the part paid by each.

Health insurance income tax benefits are not available on the premiums paid by the taxpayer for health insurance policies of grandparents, brothers, sisters, aunts, uncles, and other relatives. Premiums paid for health insurance policies of working children are also not eligible for health insurance tax benefit 80D.

Health insurance tax benefits are also available for health check-ups. The exemption limit on health check-ups is Rs. 5000. The deduction can be claimed on the payment made for preventive health check-ups of self, spouse, children, or parents. IT deduction for preventive health check-ups was introduced in 2013-14 to encourage people to be more aware of their health and prevent illnesses.

Group health insurance tax benefits do not apply to the employees of any organization covered under any group health insurance plan because the employer pays the premium.

Altogether, the health insurance exemption limit concerning deductions under 80D can be a minimum of Rs. 25,000 and rise up to Rs. 100,000 depending upon your situation. The health insurance exemption limit for senior citizens is Rs. 50,000. It is important to go through the health insurance exemption limit information given under the health insurance tax benefits section on your policy document. 

Tax Benefits for Senior Citizens Under 80D

Health insurance premiums for senior citizens are always higher as compared to those for non-senior citizens. This is because old citizens are more likely to make claims due to general poor health, making them susceptible to serious conditions necessitating hospitalization. Pre-existing diseases are also not covered in health insurance plans.

Tax Benefits for Senior Citizens Under Section 80D

In this scenario, availing of private health insurance tax benefits is not possible for many senior citizens who cannot pay the high premiums or have no use of health insurance because of non-coverage of pre-existing diseases. To give some relief to the senior citizens, GOI amended the health insurance tax benefits section, 80D in the year 2018. The amended section allows income tax deductions on medical expenses incurred by senior citizens without health insurance. The deductions can be claimed by the senior citizens themselves or by children who pay for the medical expenses of their senior citizen parents. The maximum deduction allowed is Rs. 50,000. Thus, senior citizens who cannot avail of medical insurance income tax benefits India due to lack of health insurance have been benefited.

How to Claim a Tax Deduction on Health Insurance Premiums

Private health insurance tax benefits need to be claimed while filing income tax returns for that financial year. The process is simple. 

Under the deductions column while filing ITR, select section 80D. This is the health insurance tax benefits section of the Income Tax Act, 1961. After that, you need to select the criteria under which you are claiming the deduction. The different categories are as follows.

  • Premium paid for self and family
  • Premium paid for self and parents
  • Premium paid for self (more than 60 years) and family
  • Premium paid for self, family, and parents
  • Premium paid for self, family, and parents above 60 years
  • Premium paid for self (above 60 years), family, and parents above 60 years
  • Premium paid for parents who are above 60 years

The extent of health insurance income tax benefits that you can get depends upon the exemption limits applicable to you as per the option selected by you.

Two necessary documents need to be uploaded to the ITR website to claim private health insurance tax benefits.

  • First is the receipt of the premium paid for the health insurance policy.
  • Second is the policy document carrying the name and age of the taxpayer and the family members along with their relationship with the taxpayer.

If you want to claim health insurance for parents’ tax benefits on the premium paid by you on their behalf, you need to obtain the 80D certificate from their insurer. 

There are no documents required to claim tax deductions on preventive health check-ups. However, the receipt of the payment for the same must be preserved in case of future reference.

Differences Between 80D and Other Tax-Saving Sections of The Income Tax Act

People often get confused between sections 80D and 80C of the IT act because both provide tax deductions. It must be remembered that there are many differences between 80D and 80C.

1

Section 80D

Section 80D provides health insurance tax benefits only. This implies that 80D allows deductions on the premiums paid for health insurance policies for self, spouse, dependent children, and parents only along with expenses incurred on preventive health check-ups.

Medical insurance income tax benefits India under 80D cannot be more than Rs. 100,000. This means the maximum deduction that the taxpayers can reach is 1 lakh rupees.

2

Section 80C

80C, on the other hand, allows income tax deductions on several investments and expenses such as life insurance premiums, mutual funds, small saving schemes, and more.

Under section 80C, on the other hand, the maximum deduction is Rs. 1.5 lakh.

Private health insurance tax benefits under 80D should also not be confused with the deductions offered by section 80DD, 80DDB. The types of deductions under these sections are as follows.

  • 80D provides medical insurance tax benefits to India on health insurance premiums, while 80DDB provides income tax deductions on expenses incurred on the treatments of specified illnesses. The exemption limit under this section is Rs. 40,000. 80D provides health insurance tax benefits for parents, but 80DDB is also a good instrument to provide income tax deductions for parents because the exemption limit on the expenses incurred on the treatments of specified illnesses of senior citizens and super senior citizens is Rs. 100,000. The illnesses included in this section are Parkinson’s disease, cancer, renal failure, and many more. An endorsement from a specialist doctor must be submitted to claim deductions under 80DDB.
  • 80DD provides income tax deductions on medical expenses incurred for the medical treatment, nursing, training, and rehabilitation of a dependent person with a disability. The dependent person can be the parents, children, siblings, or spouse. The exemption limit is Rs. 75,000, which rises to Rs. 1.5 lakh in case of major disability.

Other Important Facts About IT Deductions Under 80D

1

No Claim For The Premium Paid By Third Parties

Medical insurance income tax benefits India is available for taxpayers on the premiums paid by themselves only. If a third party pays the premium on behalf of the taxpayer, the said taxpayer becomes ineligible for an income tax deduction.

2

No Benefits For Employees On Group Policy

The employers can avail group health insurance tax benefits on the premiums paid by them for their employees’ group health insurance policies. The premium amount can be made a part of general business expenses by the employer. If an employee pays a partial premium amount for the group insurance policy, they can get group health insurance tax benefits on the amount they pay. Group health insurance tax benefits can also be availed by the employee in case they purchase a top-up health insurance policy in addition to health insurance. However, the tax deduction would be available only on the premium paid for the top-up policy. If the employer bears the entire premium amount, the employee is not eligible for group health insurance tax benefits.

No Tax Benefits Under Section 80D for Employees on Group Health Insurance

3

Tax Benefits For Parents Can Be Incorporated

Health insurance for parents’ tax benefits has only a single requirement that the taxpayer being assessed pays the premium for the health insurance of his/her parents. The financial dependability of the parents on the taxpayer is not a factor under 80D. Health insurance tax benefits for parents can be clubbed together with health insurance income tax benefits for self if the said individual pays the health insurance premium of his/her parents.

Tax Benefits Under Section 80D for Parents

4

Tax Benefits Is Not Applicable On The Service Charge

Health insurance income tax benefits do not apply to the service charges and the cess added to the premium amounts, and a service charge of 14% is usually added to the premium. Thus, health insurance tax benefit 80D is determined on the premium minus the service charges and cess.

5

Applicable For Long-Term Health Insurance

Health insurance tax benefits section 80D is applicable for long-term health insurance plans spanning 2-3 years. In the case of such a policy, the deductions are calculated throughout the coverage period proportionately.

6

No Claim for Parents-in-Law

The taxpayers can avail health insurance for parents tax benefits for their own parents only. This means you cannot claim health insurance tax benefits for parents for your in-laws even if you pay their health insurance premium.

Calculating Health Insurance Income Tax Deductions

Most health insurance companies offer health insurance tax benefits calculators to give a clear idea to their clients about the amounts of tax they can expect to save. The health insurance tax benefits calculator determines your taxable income after deducting an amount per your particular health insurance plan. 

For example, if you are aged 45 and pay a premium of Rs. 40,000 for a health insurance policy covering you and your spouse. In addition, you pay a premium of Rs. 60,000 for your mother, who is aged 75 years. Consider your gross income to be 800,000. The health insurance tax benefits calculator shall subtract Rs. 75,000 from your gross income because you can claim Rs. 25,000 on your policy and Rs. 50,000 for the policy of your senior citizen mother. Thus, the taxable income comes to Rs. 7,25,000. 

Consider another situation. If you are aged 61 years and pay a premium of Rs. 65,000 for the health insurance policy of you and your spouse. You also pay a premium of Rs. 70,000 for the health insurance policy for your 85-year-old mother. Your gross income is Rs. 9,50,000. The health insurance tax benefits calculator will consider that both you and your mother are senior citizens. Thus it will deduct Rs. 100,000 from your gross income. Thus, the total taxable income shall be Rs. 8,50,000. 

It is also important to talk to a tax consultant and use any health insurance tax benefits calculator online.

How to Maximize Income Tax Deductions on Health Insurance

Best health insurance tax benefits can be ensured by smartly purchasing health insurance policies. The aim should be to maximize the tax benefits.

In order to reduce the taxable income of the family, you can purchase a policy for self, spouse, and children and avail yourself of health insurance for parents’ tax benefits by paying the premium for your parents. On the other hand, your spouse purchases a health insurance policy for his/her parents and gets income tax deductions on the premium. This way, both you and your spouse decrease the taxable family income and reap the best health insurance tax benefits.

Preventive Health Check-Ups

Health insurance tax benefits under section 80D allow deductions for preventing health check-ups, and the maximum allowed limit is Rs. 5000. Thus, if you are aged below 60 and paying the health insurance premium for yourself, spouse, and dependent children but have opted for preventive health check-ups, the health insurance exemption limit increases to Rs. 30,000. Thus, going for preventive health check-ups also helps in getting the best health insurance tax benefits.

Advantages of Health Insurance Tax Deductions

  • Best health insurance tax benefits enable salaried people to take more money home. This is more beneficial for senior citizens because the 50,000 limit means more money is available for medical needs—a maximum of Rs. health insurance tax benefit 80D can save 1 lakh.
  • Flexibility is one of the best health insurance tax benefits because no matter your age or your parents, spouse, and children, the minimum health insurance exemption limit of Rs. 25,000 is available. For senior citizens, the maximum health insurance tax benefit 80D is Rs. 50,000.
  • Health insurance tax benefit 80D is available even if you want to purchase a long-term policy and pay the premium at one go instead of annual renewals. In such a case, you can avail of benefits in a uniform manner throughout the coverage term. For example, if you paid 30,000 for a policy term of 3 years, the tax benefit of Rs. 10,000 can be availed each year.
  • Health insurance for parents’ tax benefits allows taxpayers to reduce their taxable incomes, forbearing for health insurance costs of their parents. Medical insurance income tax benefits India encourages more and more people to purchase health insurance which ultimately increases the health insurance penetration in India.
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