The tax benefit in health insurance is considered to be a significant feature. Under the Income Tax Act Section 80D (under old tax regime), individual or HUF can claim up to Rs. 1 lakh of health cover tax benefits against the health insurance premium1 that you pay in a financial year. To know how you can make the most of this tax benefit, read on.
As a health insurance policyholder, you can claim a tax deduction of up to Rs. 25,000 on a yearly basis, depending on the premium paid for your policy. This coverage applies to you, your spouse, and your dependent children or parents. If either you or your spouse or your parents is 60 years or older, the tax benefit on senior citizen health insurance plans increases to Rs 50,000.2
Additionally, you can claim extra deductions for premiums paid for your dependent parents: Rs. 25,000 if they are below 60 and Rs. 50,000 if they are 60 or older.2
In cases where both you and your parents qualify as senior citizens, the maximum health care insurance tax deduction available under Section 80D can go up to Rs 1 lakh. Furthermore, up to Rs 5,000 can be claimed for preventive health check-ups for yourself, your spouse, and dependent children. This amount is included within the overall deduction limit.2
Table2 below gives a clear idea of how health care insurance premiums are tax deductible. Take a look at the deductions that you can claim under various categories.
Category | Amount of premium paid (in Rs.) | Deductions available under Section 80D (in Rs.) | |
|---|---|---|---|
Self and family | Parents | ||
Individuals , family who are below 60 years | 25,000 |
| 25,000 |
Individuals , family and their parents who are below 60 years | 25,000 | 25,000 | 50,000 |
Individuals and their families who are below 60 years, but whose parents are above 60 years | 25,000 | 50,000 | 75,000 |
The policyholder, family as well as his parents, a member is over 60 years | 50,000 | 50,000 | 1 Lakh |
Members of HUF (below 60 years) | 25,000 | 25,000 | 25,000 |
Members of HUF, a member is over 60 years | 50,000 | 50,000 | 50,000 |
Let us now take the example of Neha Mahajan, a 28-year-old college professor, to understand how Section 80D of the Income Tax Act works. Neha pays a premium of Rs. 21,000 for a health insurance plan that covers her and her husband. Other than this, she also pays the premium for a separate health insurance plan for her parents, who are both over the age of 60. The premium for this policy is Rs. 35,000.
Now, at the end of the financial year, Neha can claim up to Rs. 25,000 for the premium that she paid for her policy, which includes her husband. She can also claim up to Rs. 50,000 for the premium paid towards her parent’s policy. So, all in all, she can claim Rs. 21,000 + Rs. 35,000, that is Rs. 56,000, under the 80D deduction.
Suppose Neha also underwent a health check-up and paid Rs 4,000. As 80D also includes a tax exemption of up to Rs 5,000 for preventive health check-ups, Neha can claim the remaining Rs. 4,000 and increase her tax benefit to Rs. 25,000, bringing her total tax benefit to Rs. 60,000.
Things to keep in mind when claiming health care insurance tax deduction
Keep the following points in mind when you want to get tax benefits on your health insurance plan:
- You will be able to get health insurance tax benefits only when you pay the premium for2:
- Yourself
- Your spouse
- Your dependent children
- Your parents.
- Paying the premium for your siblings, grandparents, uncles, aunts, etc, will not make health care insurance premiums tax deductible2.
- If your children are financially independent, you will not be able to claim tax benefits for their premiums2.
- The deduction will not include service tax or the cess portion in the premium2.
- You need to know the required mode of payment under Section 80D2:
- For preventive checkups: Cash as well as digital modes
- Medical expenses: Any mode but not cash
- Health insurance premium: Any mode but not cash.
- If you have invested in a multi-year health plan, the tax deductions will be proportionate u/s 80D2.
If you are covered under a group health insurance plan, the premiums of which are being paid by your employer, you will not be able to claim the health coverage tax benefits. If you are paying a portion of the premium, you can make a claim2.
- You will be able to get health insurance tax benefits only when you pay the premium for:
- Yourself
- Your spouse
- Your dependent children
- Your parents.
- Paying the premium for your siblings, grandparents, uncles, aunts, etc, will not make health care insurance premiums tax deductible.
- If your children are financially independent, you will not be able to claim tax benefits for their premiums.
- The deduction will not include service tax or the cess portion in the premium.
- You need to know the required mode of payment under Section 80D:2
- For preventive checkups: Cash as well as digital modes
- Medical expenses: Any mode but not cash
- Health insurance premium: Any mode but not cash.
- If you have invested in a multi-year health plan, the tax deductions will be proportionate u/s 80D
- If you are covered under a group health insurance plan, the premiums of which are being paid by your employer, you will not be able to claim the health cover tax benefits. If you are paying a portion of the premium, you can make a claim.
Conclusion
A health insurance plan makes it affordable to ensure healthcare services for yourself and your family. Along with coverage, it can offer monetary relaxation with tax benefits. Understanding health insurance tax benefits can help you make the most of your policyThe skyrocketing costs of healthcare services make securing your and your family’s healthcare imperative today. Along with a healthy lifestyle, having the right health insurance coverage is not just a necessity but also a smart financial decision. The right plan not only saves you from digging into your savings in case of a medical emergency but also offers you monetary relaxation with tax benefits.
FAQs
1. What is the limit of 80D income tax?2
Under Section 80D of the Income Tax Act, you can get a tax benefit against the health insurance premium that you pay. While an individual under the age of 60 can claim up to Rs. 25,000, senior citizens can get up to Rs. 50,000 1 lakh as health insurance tax benefits.
2. Can I claim 80D and 80DD both3?
Yes, you can. Section 80D offers a tax benefit on health insurance. 80DD, on the other hand, is an additional deduction that you can claim against the expenditures you have incurred for the medical treatment (rehabilitation etc)of a dependent who suffers from a severe disability , with degree of severity as mentioned in the provision of the section.
