' Tax benefits on Health Insurance, Medical under Section 80D

Tax Benefit on Health InsuranceMost of us have been out for a group lunch with friends or colleagues. Everyone enjoys the food and, in the end, they split the bill among themselves.

Income tax is akin to a group lunch. Here, each person who falls into the income tax bracket pays a certain amount of tax. Think of this amount as each person’s share of the ‘bill’. All the individual payments of tax, taken together, pay for the country’s infrastructural development.

Tax deductions

Now, suppose you bought a ticket that gave you a discount on the restaurant bill. Your share in the bill would go down automatically. A tax deduction is a bit like this. A tax deduction is a reduction in your taxable income. It arises from the expenses and investments made by the taxpayer.

Income Tax benefits on Health Insurance

Most people are well acquainted with Section 80C of the Income Tax Act. But, to get health insurance tax benefit, you must learn about Section 80D. Many people do not know that they can claim income tax benefits on the health insurance premium. Read on to find out more about how your health insurance policy can help save you tax.

  • Tax benefit on premiums paid

You can claim up to Rs 25,000 a year on health insurance premiums you have paid. This includes the premiums that you have paid for yourself, your spouse, and children.

If you or your spouse is a senior citizen, that is, over 60 years old, the health insurance tax-saving benefit goes up to Rs 30,000.

  • Health insurance benefit for parents

If you pay the health insurance premium for your parents, you get a tax benefit of Rs 25,000 per year. There is no restriction on whether your parents are dependent on you. Furthermore, if your parents are senior citizens, this benefit goes up to Rs 30,000 a year.

If your parents are over 80 years old and you are over 60, you can claim a total benefit of Rs 65,000 under Section 80D of the Income Tax Act.

  • Tax benefit on preventive health check-ups

Within the maximum tax-saving limit of either Rs 25,000 or Rs 30,000, you can claim a benefit of Rs 5,000 on the cost of preventive health check-ups.

The tax benefit of Rs 5,000 also applies on the cost of preventive health check-ups for your parents.

If you are over 60 years old and pay for the preventive health check-ups of your parents who are over 80, then you can claim up to Rs 65,000 as the total tax benefit.

An example of how it works – Rajiv Malhotra has a family floater policy, which covers him, his wife, and children. He also pays the premiums for his mother, aged 64. He spends Rs 27,000 on the medical needs of his family, excluding his parents. But, he can claim only Rs 25,000 as tax benefit. This can be split into Rs 20,000 in insurance premiums and Rs 5,000 for preventive health check-ups. He can claim another Rs 30,000 for paying the health insurance premiums for his mother, who is a senior citizen. The maximum deduction for the preventive heath check-up of Rajiv’s mother is Rs 5,000. It is already a part of the Rs 30,000 benefit. So, Rajiv can claim a tax deduction on up to Rs 55,000 of the premium paid (Rs 25,000 plus Rs 30,000).

If Rajiv’s wife had an individual health insurance policy, she would be able to claim a tax benefit of Rs 25,000. That amount includes the deduction for the preventive health check-up. So, as a couple, Rajiv and his wife can enjoy a combined tax-saving benefit of Rs 80,000 (Rs 55,000 plus Rs 25,000).

Caveat

According to the rules, you cannot claim the tax benefit under Section 80D on your health insurance premiums if you pay these by cash. You must pay your premiums via internet banking, cheque, draft, or credit card. But, there is no such restriction on the payment mode of the preventive health check-ups. So, you make cash payments for the preventive health check-ups and claim the tax benefit.

Tax benefits under various insurance types

The tax benefit under Section 80D is available under both ‘indemnity’ and ‘benefit’ forms of health insurance. So, you can claim tax benefits on the indemnity forms of health insurance, such as individual plans and family floater plans. You can also claim tax benefits on the ‘benefit’ forms of health insurance, such as daily hospital cash and critical illness plans.

Conclusion

Health insurance is a form of investment that safeguards our finances during medical emergencies. In a dual benefit, the premiums also help us save on taxes. So, in the light of rising inflation and high medical costs, health insurance is a boon for every taxpayer.

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