What are the Tax Benefits of Health Insurance?

The importance of health and well-being in a family cannot be overemphasised, especially in today’s busy world. Hence, getting a family health insurance plan is important in medical emergencies, which can be very stressful and costly.

This particular type of insurance enables all family members to be grouped under a single policy, thus offering them protection and security. Here, we will dive deeper into family health insurance and how you can benefit from tax deductions under Section 80D of the Income Tax Act.

Understanding Section 80D

According to the Income Tax Act, a section known as 80D allows one to claim tax exemptions on the premiums paid for health insurance policies. This section stimulates individuals to take health insurance for themselves and their families. For example, the premium paid is allowed as a tax credit on an individual’s actual assessable income.

Section 80D: Understanding Deductions & Eligibility

Below are the criteria and benefits associated with claiming deductions under Section 80D:

Who Can Claim Deductions?

• Individual Taxpayers: Deduction for self, spouse, and children
• Hindu Undivided Family (HUF): Deduction for any member of the HUF

Types of Policies Covered

• Health insurance policies for individuals and families
• Policies covering parents and senior citizens
• Preventive health checkups

You can even get a tax benefit of ₹25,000 for the health insurance premiums paid for yourself, your spouse, and your dependent children. Moreover, you can also claim a deduction of up to ₹ 25,000 for yourself and up to ₹ 50,000 for parents who are senior citizens regarding premiums paid towards a medical insurance scheme.

Maximising deduction cannot touch ₹ 50000 (₹ 1,00,000 if the taxpayer or both parents are senior citizens).

How Much Tax Benefit Can You Claim for Health Insurance Under Section 80D?

The deduction towards health insurance premiums under Section 80D of the IT Act has been initiated to spread awareness about the need for health coverage. Many people need clarification on whether health insurance is tax-deductible and how much they can save.

Here’s a look at how much health insurance tax deduction you can get:

• The deduction limit depends on the age of the primary policyholder.
• If you pay the premiums, you can claim a deduction for an individual/family floater policy and a separate policy for dependent parents.
• If you are under 60 years old, the maximum deduction is ₹25,000.
• If you are 60 years or older (senior citizen), the maximum deduction is ₹50,000.
• HUFs are eligible for a claim of up to ₹25,000 if the Karta is under 60 years old and up to ₹50,000 if the Karta is 60 or older.
• NRIs can claim up to ₹25,000 (regardless of age) if they buy a health insurance policy in India for themselves or their parents.
• The Preventive Health Checkup (PHC) allowance can be claimed if you still need to reach the maximum deduction limits mentioned above.
• The PHC limit is ₹5,000 for those under 60 and ₹7,000 for senior citizens.

What Deductions Are Allowed Under Section 80D?

Below is a table summarising the deductions allowed under Section 80D for various categories:

Category	Maximum Deduction (₹)	Remarks
Self, spouse, and children	25,000	If all are below 60 years.
Self, spouse, and children	50,000	If any member is 60 years or above.
Parents (below 60 years)	25,000	If parents are below 60 years.
Parents (60 years or above)	50,000	If parents are senior citizens.
Preventive health check-up	5,000	Included in the overall limit of ₹25,000/₹50,000.
Total deduction possible	1,00,000	If an individual and parents both are above 60 years.

Health Insurance Premiums for Parents: Tax Deduction Benefits Under Section 80D

One major advantage of section 80D is the component that allows taxpayers to claim a deduction for the premium paid towards health insurance for parents. This deduction is in addition to the one claimed for self, spouse, children, and dependents. 

If you have senior citizen parents, you can claim a further deduction of up to ₹50000. This goes a long way in easing the financial constraints of healthcare expenses for your ageing mother or father. And also

• If you pay health insurance premiums for your parents, you can claim the specified deductions based on their age.
• Remember, the deduction cannot exceed ₹50,000 (₹1 lakh for senior citizen parents).

Preventive Health Checkups Under Section 80D

Regular health check-ups are crucial to preventing underlying Health problems from escalating. Section 80D has also provided for an expenditure on preventive health check-ups. 

There is a reimbursement allowance of up to ₹5,000 per year for preventive health checkups for yourself, your spouse, children, and your parents. This amount is within the general limit of ₹25,000 or ₹50,000 for the individual’s age criteria.

Can Medical Expenses Be Claimed Under Section 80D?

Medical expenses can also be claimed under Section 80D, but only for senior citizens not covered by any health insurance policy. However, the total amount for deductions in terms of such medical costs is limited to ₹ 50,000.

This clause ensures that elderly people not covered by health insurance affordances still get a tax break for the costs incurred. But here, ordinary medical expenses cannot be taken as deductions for bringing about the said change.

How to Claim Deduction Under Section 80D?

Here is a step-by-step process of how to claim a deduction under Section 80D:

1. Calculate the Total Premium Paid: Add the premiums for yourself, your spouse, children, and parents.
2. Include Preventive Health Checkups: If you have incurred any expenses on preventive health checkups, include those as well.
3. Check the Eligibility: Ensure the premiums and checkups are within the prescribed limits.
4. Collect Document Proof: Keep receipts and policy documents handy for verification.
5. File the Tax Return: In the appropriate section, mention the total deduction under Section 80D in your income tax return.

Documents Needed to Claim Tax Benefits on Medical Insurance Under Section 80D

You can avail of deductions on Mediclaim under section 80D, which is subject to a limit of ₹25,000, ₹50,000, ₹75,000, or ₹1,00,000. To do this, you need some documents as proof:

• Original receipt for premium payment. A printed receipt generated from the insurer’s website is permissible.
• The date on the receipt should be within the financial year in which specific tax has been computed.
• The receipt must clearly state the date of receipt, the amount of the premium paid, and the manner of payment.
• No cash receipts for any amount related to premium payments are acceptable.
• Receipts from agents can only be used to claim a tax deduction if the receipts are from a permanent establishment.

What Are the Exclusions Under Section 80D?

While Section 80D offers substantial benefits, there are some exclusions to be aware of:

• Cash payments made for premiums are not admissible for deduction.
• Employer-paid group health insurance premiums cannot be claimed.
• Any premium paid for siblings, grandparents, aunts, uncles, or relatives is prohibited.
• Section 80D does not include the premium for a life insurance policy.
• Any expenses incurred for non-allopathic treatments cannot be claimed.
• Expenses for in-laws are outside the range of premiums one should pay.

Conclusion

Health insurance is compulsory for families to have contingency and risk-free financial coverage. Thus, by taking advantage of the provisions of Section 80D, you can substantially decrease your Taxable Income and simultaneously provide complete Health Insurance to your family.

Remember to keep all necessary documents and receipts, stay within the prescribed limits, and file your deductions correctly to maximise your tax benefits. You can also consult a tax advisor for personalised advice. Stay healthy, stay insured!