Health Insurance Tax Benefits

The Income Tax Act's Section 80D allows individuals to claim a deduction of up to ₹ 25,000 from their taxes for the health insurance paid within a particular fiscal year. However, senior individuals (above 60 years of age) can claim a deduction of up to ₹ 50,000 per financial year. Therefore, people can benefit from tax savings under section 80D by buying insurance for themselves, their spouses, parents, and children. 

Suppose you are giving some of your pocket money to buy something important like medicine for your family to help them get better. The government says, “Hey, that’s a good thing you are doing. Let us give you some reward”. 😄 

Similarly, when you pay premiums under your health insurance for your family's well-being, section 80D of the Income Tax Act rewards you with tax deductibles you can claim to save on these premiums.

In general, the deductions under 80D are of different types. It includes:

1. The premium paid under health insurance for self, spouse, children and parents.
2. Costs associated with preventive health check-ups (health checkups, physical examinations, blood tests, etc.)
3. The cost involved in treating a senior citizen’s health (above 60 years of age) who is not covered under a health insurance policy.

The tax deductions available under all the different types vary. You can easily calculate your tax deductions under 80D by considering the coverage options and premium paid.

Tax Deduction on Health Insurance Premium Paid for Parents Under Section 80D:

People who pay their parents' health insurance premiums can claim additional mediclaim deductions with 80D. For getting a tax benefit in health insurance under 80D, you can claim up to ₹25,000 if your parents are under 60 years of age and you can claim up to ₹50,000 if your parents are above 60 years of age.

Confused? Don’t worry! Here is an example to make you understand this better.

Mr. Mehta (54 years old) pays a premium of ₹30,000 annually under health insurance for his family. In addition, he also pays a premium of ₹35,000 annually for his parents (aged below 60 years). In such a case, what will be his tax deductible?

Preventive Health Check-ups under Section 80D:

Preventive Health Checks are routine medical examinations that identify a specific illness through early diagnosis and tests. Therefore, the government offers tax deductions on preventive health checkups under 80D so that a person can get their regular checkups.

The maximum deduction under section 80D for preventative health examinations in a financial year is ₹ 5,000. You, your parents, your spouse and your dependent children may claim the benefits for medical checkups.

Yes, the medical expenses can be claimed under section 80D only for senior citizens. They need higher attention due to their growing age and numerous health issues. And thus, they are required to pay higher premiums to cover everything for their good health. These high premiums cannot be afforded by every individual. Thus, section 80D offers tax deductions for medical expenses for senior citizens who do not have an insurance.

If you are paying the medical expenses of your parents (who are above 60 years old) who are not covered under any health insurance, you can claim a tax deduction under 80D. The maximum annual deduction is ₹50,000, including health insurance premiums (if any) and medical expenses.

In order to take advantage of the long-term policy discount provided by Indian insurance firms, many consumers get multi-year health insurance. Under Section 80D of the Income Tax Act, you can get multi-year health insurance policies and pay their premiums in one amount at the time of purchase. This premium amount can be claimed across different years.

Furthermore, tax deductions on multi-year health insurance premiums are ₹25,000 for people under the age of 60 and ₹50,000 for senior citizens (above age 60). It is much more similar to one-year health insurance policies.

For Example: To better understand, Mr. Mehta paid around ₹45,000 premium to buy a 3-year health insurance policy. So, under section 80D, he can claim a tax deduction of ₹15000 per financial year to cover the cost of the premium.

Any critical illness or medical emergency is unpredictable and causes a lot of expenses that cannot be easily afforded. Even if a person is diagnosed with dengue, a few days of hospitalization might be quite expensive. Now imagine if someone in your family has to undergo treatment for a serious illness such as a heart arrest, stroke, or cancer. The expense will reach the skies.

In such cases, it is important to have health insurance that can reduce your financial burden. Such critical illnesses tax deductions are covered under Income tax, section 80D for health insurance. 

Section 80DD of the Income Tax Act provides a deduction for individuals who incur expenses on medical treatment, care, and rehabilitation for a disabled person. Depending on the level of disability, one can claim a maximum deduction of ₹75,000 to ₹1,25,000.

Health insurance premiums for senior citizens are always on the higher side. Insurance companies may also be unwilling to provide a health cover tax benefit for those who are old or suffer from pre-existing ailments.

However, Budget 2018 provided some relief for senior citizens who have high medical expenses and are unable to buy health insurance due to pre-existing ailments or can't afford high premiums.

The Budget has amended Section 80D, which allows a maximum deduction of ₹50,000 for medical expenses incurred on senior citizens. This deduction can be claimed by the senior citizen himself/herself or by his/her children if the children are incurring medical expenses for their senior citizen parents.

For Example, Mr. Mehta has paid ₹53,000 for his senior citizen parent, who did not have a health insurance policy. He can claim a total deduction of ₹50,000 under the Section 80D.

The process of claiming the section 80D deduction is quite easy. It just requires documentation for the mode of payment of insurance and health checkups. The claiming can be done in two ways:

• By providing proof of payment for medical expenses and insurance premiums to your employer.
• By directly claiming the deductions while filing your Income Tax Returns (ITR)

Follow the below steps in case you are filing your ITR:

• Step 1: Visit  Income Tax Portal
• Step 2: Log in to your account or create a new one to file the ITR. Fill in your required details
• Step 3: To claim the deductions on medical insurance premiums, visit the “Deductions” column on your ITR filing.
• Step 4: Select the condition under which you are claiming a deduction for yourself, for your parents, spouse, children or siblings.
• Step 5: Provide the supporting documents especially the receipts of premiums paid and expenses on preventive health checkups. Once the documents are verified, you will receive the tax deductions.

The documents required to claim the tax deduction under section 80D include:

• The receipts of premiums paid for the health insurance show the family members' names, relationships and ages.
• 80D insurance certificate for a premium paid for a parent’s health policy.
• Receipts or copies of the expenses incurred due to Preventive health checkups.

Some other documents essential in filing for an ITR include:

• Aadhar Card
• PAN Card
• Form-16 
• Bank Statement

The following are a few of the exclusions listed in section 80D of the Income Tax Act. 

• You cannot claim for a premium amount that is not paid during the fiscal year
• If your employer covers you under a group health insurance, you cannot claim through 80D
• Any amount given in support of grandparents, siblings, working children, or any other relations
• If the premium amount paid for the health insurance is done with cash
• You cannot claim for a higher amount than your particular age group's maximum limit

• Thoroughly read your policy for any tax exemptions 
• To avail of deduction, the premium should be paid in any mode other than cash. However, the payment for Preventive Health check-ups can be made in cash.
• The maximum deduction under section 80D can be Rs 1,00,000 if you buy health insurance for yourself or your parents and both you and your parents are senior citizens.
• HUFs (Hindu Undivided Family) can also claim this deduction for the premium paid to ensure the health of any member of the HUF.
• Benefits under Section 80D are available over and above the limit of ₹1.5 lakh under section 80C.
• The amount available for senior citizens’ deductions can also be spent on medical expenses.
• If the health insurance premium is paid in one go, it allows tax benefits for the number of years of insurance coverage.

Health insurance is a way to safeguard your pocket from medical expenses. Under Section 80D of the Income Tax Act, you can avail of tax benefits on the premiums paid towards your health insurance. This makes a health insurance policy a beneficial tax-planning tool, which is definitely a wise investment for your future.