Tax benefit on health insurance
A health insurance policy is not just a great way of protecting you and your family from unforeseen medical expenses, but also a very effective tool to save taxes.
Yes, you heard that right. Buying Health Insurance can serve dual benefits. You not just get health cover that would pay your hospital bills, medicines, etc., but would also help you save money by reducing your tax outgo. So, let’s see how it works.
Health insurance tax benefit
The premium paid for any health insurance policy reduces your annual taxable income as you can claim income-tax deduction on that amount. And reduced taxable income means reduced tax liability for that particular financial year.
What’s even better is that you can claim income-tax deduction on not just the premium paid for your own policy, but also for that of your spouse, children and parents.
Under Section 80D of the Income-Tax Act, 1961, insured citizens under the age of 60 can avail a tax deduction of up to Rs 25,000 from taxable income in a financial year on health insurance premiums paid for self, spouse and dependent children.
Furthermore, if the age of the policyholder is 60 years or more, the deduction limit increases to up to Rs 50,000 in a financial year on health insurance premiums paid for self, spouse and dependent children.
Health insurance tax benefit for premium paid for parents
You can also claim an additional tax benefit of up to Rs 25,000 for the health insurance premium paid for your parents aged below 60 years, over and above the Rs 25,000 benefit for premium paid for self, spouse or children.
In case your parents are above 60 years of age, then the limit of additional benefit increases to Rs 50,000 per annum.
Possible scenarios on exact tax benefits on health insurance
- If you are under 60 and paying premium just for self, spouse and children and not for parents: You can claim deductions on premiums of up to Rs 25,000 per annum
- If you are above 60 and paying premium just for self, spouse and children and not for parents: You can claim deductions on premiums of up to Rs 50,000 per annum
- If you are under 60 and paying premium for your parents who are also under 60: You can claim deductions on premiums of up to Rs 50,000 per annum
- If you are under 60 and paying premium for your parents who are above 60: You can claim deductions on premiums of up to Rs 75,000 per annum
- If you are over 60 and paying premium for your parents: You can claim tax deductions on premiums of up to Rs 1 lakh per annum to cover yourself, spouse, children and elderly parents.
Additional medical insurance tax benefits
- As per provisions of Section 80D, you are entitled to tax benefits of up to Rs 5,000 on your annual preventive health check-up. The Rs. 5,000 limit is included within the overall personal deduction limit (of Rs 25,000/Rs 50,000 depending on the age of the insured) for health insurance premiums
- As per provisions of Section 80DD, you can claim income tax deduction on medical expenditure incurred on any dependent having disability of up to Rs 75,000 per annum. In case of severe disability, one can claim up to Rs 1.25 lakh as deduction in a single financial year
- As per Section 80U, if you are yourself a person with disability, you may claim the same deductions as available to a dependent with disability under Section 80DD, depending on the degree of disability
- According to Section 80DDB, if you or any of your dependents have any specified diseases such as neurological disorder, malignant cancer, AIDS, chronic renal failure or hematologic disorders, then you can claim deduction up to Rs 40,000 in a year on medical expenditure made on the treatment of these diseases. If you or your dependent is a senior citizen, then deductions can be up to Rs 1 lakh per annum
Points to remember while availing medical insurance tax exemption• To avail the benefit of income-tax deduction, one must note that the premium payment has to be done either through a cheque or credit card and not by cash • The health insurance premium that you pay must be from the taxable income applicable for the year you offer for tax. • You cannot claim income-tax deduction for group health insurance policies. Only individual health insurance policies are covered under Section 80D • Health insurance benefits under Section 80D are available only to individuals and Hindu Undivided Families (HUFs) and not corporates.
Disclaimer: The above information is indicative in nature. For more details on the risk factor, terms and conditions, please refer to the Sales Brochure and Policy Wordings carefully before concluding a sale.