Income Tax Benefits on Health Insurance

We all love to enjoy double benefits from a single payment. Health Insurance is also one such investment that gives double benefits. Health Insurance provides you with financial protection against medical emergencies, and at the same time, the premium paid for a health insurance policy is also eligible for tax benefits!

A health insurance policy premium offers tax benefits under section 80D of the Income Tax Act, 1961. You can also avail of tax benefits for the premiums paid for health insurance plans bought for your spouse, dependent children, parents.

How much tax benefit is available from a health insurance plan?

A health insurance plan’s premium is eligible for deduction from your taxable income under Section 80D of the Income Tax, 1961.

Scenario Deductions
Health Insurance Plan for Self Rs. 25,000/-
Health Insurance Plan for Self and Spouse Rs. 25,000/-
Health Insurance Plan for Self, Spouse, dependent children up to age 25 Rs. 25,000/-
Health Insurance Plan for Parents Rs. 25,000/-
Health Insurance Plan for Senior Citizens Rs. 50,000/-
Health Insurance Plan for Self, Spouse, dependent children up to age 25 and Parents Rs. 50,000/- (Rs. 25,000/- + Rs. 25,000/-)
Health Insurance Plan for Self, Spouse, dependent children up to age 25 and Parents Rs. 75,000/- (Rs. 25000/- + Rs. 50,000/-)
Health Insurance Plan for Self and Parents (All Senior Citizens) Rs. 1,00,000/- (Rs. 50,000/- + Rs. 50,000/-)

What is the maximum amount of Tax Saving available from a health insurance

The maximum amount of tax that you can save from a health insurance plan depends upon the tax bracket you fall under:

Tax Bracket Tax Saving
5.20% Rs. 1,300/-
20.8% Rs. 5,200/-
31.2% Rs. 7,800/-

This tax saving is over and above the tax amount that you save by making an investment in eligible instruments as listed in Section 80C of the Income Tax Act, 1961.

Health Insurance Benefits of Senior Citizens

A health insurance plan for senior citizen parents is more expensive than a health insurance plan available for you or for your family. A senior citizen’s health insurance plan is also expensive because insurance providers also take into account the pre-existing ailments that they might be already suffering from or might suffer from.

Taking this important fact into account, the government of India, in its budget for the year 2018, decided to award some major relief to the senior citizens of the country who are already stressed with high medical bills and cannot afford to buy a health insurance plan or continue their existing plan.

As per the new amended, Section 80D, allows a deduction of the medical expenses incurred by senior citizens. This deduction can be claimed by the senior citizen or by his/her children if they are paying medical expenses for their senior citizen parents.

Tax Benefits on Preventive Medical Checkups

  • A maximum amount of Rs. 5,000 on a yearly basis spent towards preventive health checkups on a yearly basis within the overall limit is also eligible for claiming towards tax deduction under section 80D of the income tax act, 1961.

What documents do I require to claim an 80D deduction?

  • 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.

Important Points to Remember:

  • 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.

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.

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