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Tax Benefits of Health Insurance Under Section 80D

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Jan 23 2023

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Importance of Health Insurance

Life as we know it, is highly uncertain whereas death and taxes are certain. Post-COVID, we have begun to value health and, more importantly, realize it is very important to have health insurance coverage and quick access to quality healthcare. For any medical emergency, health insurance is a must since it offers the financial backup you need during such emergencies. Hospitalization and surgeries can burn deep holes in your pockets and cause a dent in your hard-earned savings. All these can be avoided if you plan ahead of time and invest in health insurance. You will have to pay an annual premium, but it is worth it since this insurance will prove to be most useful during your hour of need. To promote and popularise the concept of investing in a health insurance policy, insurance companies and the government offer many benefits. For instance, the government promotes health insurance by providing a deduction from income tax under section 80D.

Investing in health insurance has to be a part of your financial plan to secure your and your family’s future financially. Do your due diligence on your capacity for premium coverage, who to include in your health coverage, an assessment of any pre-existing medical diseases and conditions, and other factors, and then invest in the most suitable health insurance plan. While you are 18 years or younger, you are covered by your parent’s health insurance plan. Still, as you grow to be financially independent, you must purchase your own health insurance - it does not have to be a full-scale plan. Still, basic coverage with a good and reliable insurance company can also be very useful in the short and long run.

 

What Are the Tax Benefits of Health Insurance?

We all know that health insurance acts as a safety valve against unforeseen medical expenses. It is the most foolproof way of accessing quality healthcare in times of emergency. It boosts our morale and financial confidence while undergoing medical treatments. Thus, purchasing medical insurance is the key to affording primary treatment without facing debt.

Going beyond the treatment compensations and the medical coverage, you also have a provision of tax exemptions for the health insurance premiums you pay towards the policy. This way, your access to healthcare amenities becomes easier.

What is Section 80D?

The Government of India has implemented several policies with the motive of making quality healthcare accessible. Section 80D of the Income Tax Act in India is one such example. It entails the deduction for medical insurance in the form of a premium payable. Under Section 80D, every individual or anyone belonging to Hindu Undivided Family (HUF) can claim tax deductions from their total annual income for premiums paid towards medical insurance bought for themselves as well as dependents, namely, spouse, children and elderly parents. This deduction is also available for all critical illness plans and top-up health plans. The icing on the cake is this benefit is over and above what benefits you avail under Sec 80C.

Tax Benefits in Health Insurance Through Tax Section 80D

There are many Tax Benefits under Section 80D that you stand to receive by buying a health insurance policy. Read more to know more.

  •  You can claim deductions up to ₹ 25,000 per financial year on the premium charged. Such a deduction for medical insurance is applicable to you, your spouse, and your children.
  • You can also avail of tax benefits for annual preventive health check-ups. The claim can be up to ₹ 5,000 under the Income Tax Act Section 80D.
  • As per Section 80D of the Income Tax Act, you can avail of tax benefits on premiums paid for your parents’ health insurance only if your parents are dependent on you.
  • Per the Income Tax Law, you can avail of tax exemption under 80D up to ₹ 5,000 for the expenses incurred for preventive health checkups of your parents who are less than 60 years. While it also lets you avail of a tax exemption under 80D based on the premium you pay for health insurance up to ₹ 50,000.
  • You can avail of the tax benefit of up to ₹ 80,000 (which includes preventive annual health checkups), based on the premium you pay for the health insurance of your parents aged 60 years or more while you are 60 years or below.
  • In case you are 60 years or more and pay the premium for the health insurance policy for your parents (who are senior citizens, too), you can avail of a tax exemption under 80D for up to ₹ 1,07,000 (includes preventive annual health checkups).
  • In case the premium is being paid partly by you and partly by your parents, both of you can claim a deduction to the extent of each one’s contribution.

A Comprehensive Table Regarding Health Insurance Income Tax Deductions

Listed below are Tax Benefits from Investing in Health Insurance That Will Blow Your Mind!

Conditions

Tax Exemption -Premium

Tax Relaxation – Preventive Health Check Up

Total Deductions

You and your parents not yet 60

₹ 25,000 + ₹ 25,000

₹ 5,000

₹ 55,000

You are below 60 but your parents are 60+ (Senior Citizen can claim up to ₹ 7,000)

₹ 25,000 + ₹ 50,000

₹ 5,000

₹ 80,000

You and your parents are 60+

₹ 50,000 + ₹ 50,000

₹ 7,000

₹ 1,07,000


What Are the Taxation Exclusions Regarding Health Insurance?

Listed below are the tax exclusions for Health Insurance per Section 80D

  • All tax deductions apply to trackable payment only. No tax benefits can be attained if you pay your premium payment through cash.
  • The service tax charged on health insurance premiums is 15%. There is no financial relaxation on that amount. You have to pay the service tax, and cess charges levied on the insurance premiums.
  • Group Health Insurance premiums provided by the company will not be eligible for deductions under Section 80D. However, if you wish to enhance medical coverage by paying a higher premium, you can avail of deductions on the premium paid for group health insurance.
  • However, you are not entitled to claim tax benefits in the medical coverage for siblings, grandparents, or any other relative.

 

What Documents Do You Need to Claim Medical Insurance Tax Benefits Under Section 80D?

As of today, there is no proof or documentation required to avail of medical Insurance benefits in terms of tax deductions under Section 80D. Except that you must make premium payments in trackable mode except in cash.  Every individual or those belonging to HUF who buys health insurance for themselves and their immediate family can claim tax deductions of up to ₹ 25,000. An additional deduction slab was introduced by the Income Tax Act -  of ₹ 50,000 if the parents of the primary policyholder are senior citizens, up to a maximum of ₹ 40,000 if the parents are below 60 years, and up to INR 1 lakh if the parents are aged 60 and above.

 

In order to avail of tax benefits, you should pay premium amounts by Internet banking, cheque, draft, or even by credit card. Cash payment for preventive health checks is eligible for section 80D benefit.

Also Read: This Added Health Insurance Benefit Will Blow Your Mind!

Use an Income Tax Calculator to Calculate Your Taxable Income

Financial planning involves the right investments at the right time. A list of your life goals, both short and long-term, helps you in assessing your current financial situation and where you need to intervene. It helps to know what is your annual taxable income. For the uninitiated, it can take time to familiarise with income tax and financial planning, let alone health insurance and tax deductions. Here’s how you can easily find out your taxable income with the help of an income tax calculator. That will aid you in planning your investments, including buying health insurance for yourself and your family.

Conclusion

The important reason for owning medical insurance is to secure your future financially against uncertainties. Delaying to purchase medical insurance may cause a severe financial crisis in emergencies. There is no better time than now to start investing in health insurance. It acts as a safety blanket for you and your loved ones and comes with the added advantage of many tax exemptions and benefits. These exemptions and reimbursements make health insurance a feasible option for more people. As per the Income Tax Act, there are different deductions under Section 80D that you are eligible for when you invest in health insurance for yourself and/or your parents. You need to read the health insurance documents and find out what tax benefits are being provided under your policy. You should scrutinize every word of your policy to derive proper medical aid and financial assistance. Make an informed decision today and stay ahead of your problems.

FAQs About Section 80D

  • Can you get health insurance tax benefits?

Yes, every individual or anyone belonging to Hindu Undivided Family (HUF) can get health insurance tax benefits.

  • Does Preventive Health Check-up come under Section 80D?

Yes, Preventive Health Check-up comes under Section 80D. A deduction up-to the amount of ₹ 5000/- within the overall limit of ₹ 25,000/ ₹ 50,000 can be claimed either by the policyholder for self, spouse, children or elderly parents.

  • What aspects of preventive health check-ups can come under tax claims?

Preventive health check-ups include routine blood tests, high blood pressure, cholesterol and diabetes tests, HIV tests, critical illness screenings and vaccinations and flu shots. One can claim tax benefits under Section 80D.

  • Who receives health insurance tax benefits under Section 80D?

Every individual or anyone belonging to Hindu Undivided Family (HUF) can receive health insurance tax benefits under Section 80D.

  • Am I eligible to avail of tax deduction under Section 80D?

Yes, every individual or anyone belonging to Hindu Undivided Family (HUF) is eligible to avail of tax deduction under Section 80D.

  • How much can you claim for health insurance on taxes?

There are different slabs where one can claim tax deductions for health insurance.

  • Does health insurance come under 80C or 80D?

Yes, premiums paid towards life can be used to claim tax benefits under Section 80C whereas and premiums paid towards health insurance policies can be used to claim tax benefits under Section 80D of the Income Tax Act.

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