Income Tax Benefits on Health Insurance

A health insurance policy is one of the best financial investments that will help everyone cover unforeseen medical expenses. However, many people prefer to bear the cost of medical treatment from their savings. Therefore, to tackle the issue of people preferring to drain savings rather than buy health insurance policies the government has introduced income tax benefits on health insurance purchases. The tax benefits are available under Section 80D of the Income Tax Act, 1961.

Buying a health insurance plan is beneficial as it offers tax benefits as listed in the table below.

Thus, the above table exhibits the numerous scenarios within which the policyholder can avail of tax benefits offered by the government under Section 80D of the Income Tax Act, 1961. Thus, it is recommended to check income tax benefits on health insurance before investing.

Tax savings are possible by investing in certain financial tools. Purchasing a health insurance premium and paying the premium amount is one way of saving tax under section 80D of the Income Tax Act, 1961.

So, the maximum amount of health insurance tax benefit 80D would be Rs. 1 lakh if you and your dependent parents are more than 60 years of age (Rs. 50,000 for yourself/spouse + Rs. 50,000 for dependent parents).

However, if you are less than 60 years of age but either of your parents is more than 60 years of age, then the maximum amount of health insurance tax benefit 80D would be Rs 75,000 (Rs. 25,000 for yourself/spouse + Rs. 50,000 for dependent parents).

However, if you are less than 60 years of age and both your parents are less than 60 years of age, then the maximum amount of Income tax benefits on health insurance for senior citizens would be Rs 50,000 (Rs. 25,000 for yourself/spouse + Rs. 25,000 for dependent parents).

Section 80D of the Income Tax Act 1961 deals with offering tax benefits to an individual. This section offers tax relation up to Rs. 25000 for the premiums paid for the health insurance policy in a policy year. This tax benefit increases up to Rs. 50000 for individuals paying health insurance premiums for parents who are senior citizens. Senior citizen refers to the age of parents being more than 60 years.

Thus, individuals paying for health insurance premiums either for yourself, your spouse and dependent children up to the age of 25, and parents can avail of tax deduction under Section 80D of the Income Tax Act 1961.

Health Insurance tax benefit under section 80D allows tax deductions for premiums paid towards the purchase of a health insurance policy. All types of premiums whether single or regular premiums are eligible for tax deduction. The deduction amounts are as follows.

There is a difference between the benefits offered by Section 80D and Section 80C of the Income Tax Act 1961. The following table shows the distinction between the benefits received from each of these sections.

Yes, you are eligible to receive income tax benefits for a Senior Citizen Health Insurance Plan. If you purchase it for your parents, who are more than 60 years of age, you can get an Income Tax Benefit under section 80D upto Rs 50,000 which is over and above your 80D limit of Rs 25,000, in case you are less than 60 years of age.

However, if you are more than 60 years of age, you can avail of a Senior Citizen Health Insurance Plan for yourself and get an Income Tax Benefit under section 80D upto Rs 50,000 for the premium payment of the same, under the Old Tax Regime.

The tax benefit is offered by the government to propagate the importance of having a health insurance policy.

To promote the importance of health insurance coverage and to boost the purchase of health insurance policies for self, family, and parents the government of India has introduced multiple tax benefits under section 80D of the Income Tax Act 1961. So purchasing a health insurance plan for your parents is beneficial for 2 reasons namely:

• You shall be safeguarding the health of your parents financially in times of medical emergency
• You can earn tax benefits by paying the premiums of the health insurance policy.

The tax benefits available for parents’ health insurance plan are as under

• Rs. 25000 for the premium paid for parents' health insurance plan aged below 60 years.
• Rs. 50000 for the premium paid for parents' health insurance plan aged above 60 years.

Any individual is eligible to receive tax benefits if he/she has purchased a health insurance policy. Section 80D of the Income Tax Act states the following procedure for filing claim deductions for medical insurance premiums. Here's a guide to accessing this tax benefit:

Acquire Health Insurance

• Purchase a health insurance policy for yourself, your family, or your parents.
• Ensure you retain all policy documents, including certificates and premium payment receipts.

Claim Deductions

• When filing your income tax return, assert the deduction for the premiums paid towards your health insurance.
• Keep proper records of your premium payments.

Submit Tax Return

• Submit your tax return along with relevant forms and supporting documents to the Income Tax Department.

• Apart from the above-mentioned process, there are certain important points that one needs to note down. Here are some essential points about Section 80D:

Eligibility

• Individuals and Hindu Undivided Families (HUFs) qualify for this deduction.
• Entities like companies or firms are ineligible.

Deduction Limits

• Premiums paid by any means other than cash:
• Up to Rs. 25,000 for self, spouse, dependent children, or parents.
• Up to Rs. 50,000 for families or parents aged 60 and above.

Preventive health check-ups (cash payments allowed)

• Up to Rs. 5,000 for self, spouse, dependent children, or parents.

Medical expenses for senior citizens without insurance

• Deduction of up to Rs. 50,000 on incurred medical expenses.
• Kindly note the deductions mentioned above are separate from the Rs. 1.5 lakh limit claimed under Section 80C.

Income tax benefits on health insurance for senior citizens U/S 80D are available for premiums paid for parents. It means, that an individual can buy a health insurance policy for parents and avail tax benefits for the same.

The tax benefits that an individual can avail under section 80D of the Income Tax Act 1961 for the health insurance purchased for parents are as under:

• Rs. 50,000 for the health insurance policy purchased for parents who are senior citizens i.e. more than 60 years of age.
• Rs. 25,000 for the health insurance policy purchased for parents below the age of 60 years.

• Premium payment receipt of a health insurance plan is the only document that you need for claiming the tax deductions under section 80D of the Income Tax Act, 1961.

• Sometimes your employer might ask you to also submit a copy of the policy document showing your name along with the members covered under the plan, their age, and your relationship with the members covered, i.e., Spouse, Children, etc.

• In case you are paying premiums for your parent’s health insurance policy, you should ask the insurance company for an 80D certificate stating premium payment has been made by you. Here you have to provide the insurance company with information about the payment source.

• For example, the Credit Card in your name, which was used for making a premium payment, or your bank account, which was used for making online or cheque payment.

• Read the policy document carefully to know the tax exemptions.

• Rs 1,00,000 is the maximum deduction available under section 80D, considering you and your parents both are senior citizens.

• This benefit is also available for HUFs (Hindu Undivided Family) for premium payment done towards insuring the health of any member of the Hindu Undivided Family.

• Premiums payment must be made in any mode other than cash to avail tax deduction.

• Payment done towards Preventive Health checkups in cash is accepted.

• The tax benefits available under Section 80D is over and above the Rs. 1.5 Lakh limit available under Section 80C tax.

In Short,

Health insurance plans are the best option for protecting your savings from medical-related expenses. It also helps you bring down your tax liability by allowing you to deduct up to Rs. 1 lakh from your taxable income under section 80D of the Income Tax Act, 1961. It is a very effective tax planning instrument making it a must-have for a financially and healthy secure future.

Thus, a health insurance plan is not merely an investment tool but has two big advantages namely: financial protection in case of medical emergency and health insurance tax benefit under section 80D of the Income Tax Act 1961. Therefore, purchasing health insurance plans for self, family, and parents must be encouraged as you can have peace of mind without worrying about finances and savings.