Health insurance is a crucial insurance cover which provides you and your loved ones the financial security required for a range of healthcare needs. Whether there is an emergency or a planned hospitalization, a health plan ensures optimum coverage by providing you financial assistance to meet sudden or planned healthcare needs.
Along with its primary aim of safeguarding your medical expenses, the fact that it is a tax-saving investment is a big draw of a health insurance plan. So, besides building up your insurance portfolio and securing the financial aspect of your healthcare, health plans are also a useful tax-planning tool!
Tax Benefits under Section 80D of Income Tax Act
As per the Income Tax Act 1961, health insurance is regarded as an important investment, and to encourage more and more people to follow a healthy lifestyle and buy health plans, the benefit of tax exemptions is being offered.
You can enjoy tax deductions u/s 80D of the Income Tax Act 1961. According to Section 80D, income tax deductions are offered towards health policies on self, spouse and children, and also towards non-senior citizen dependent parents, and senior citizen dependents
Eligibility for Deduction
The premiums you pay towards a health policy are exempted from your income tax liability for a particular financial year. You are eligible to claim income tax deduction for the following members of the family under Section 80D of the Income Tax Act 1961: –
- Self (policyholder)
- Spouse
- Dependent children
- Parents
HUF (Hindu Undivided Family) can claim tax benefit under this section according to the premium of an individual member (subject to the upper limit of tax benefits allowed under the section).
Extent of Deduction in a Financial Year
The total deductions you can claim under Section 80D are as follows:
| Self, Spouse & Dependent Children | Parents | Total Deduction Under 80D | |
|---|---|---|---|
| When every person is below 60 years of age | Rs. 25,000 | Rs. 25,000 | Rs. 50,000 |
| Assessee, spouse and children < 60 years and parents > 60 years of age | Rs. 25,000 | Rs. 30,000 | Rs. 55,000 |
| Assessee and his parents >= 60 years | Rs. 30,000 | Rs. 30,000 | Rs. 60,000 |
How much tax benefit can you get if you take a policy for your parents and family?
The premium paid towards health policies for your parents also qualifies for deduction under Section 80D of the Income Tax Act. The tax exemption is available to individuals on premiums of health plans paid for self, spouse, children and also parents. One thing to note here is that it does not matter whether the children or parents are dependent on not, you will still get the benefit.
Section 80D – Exclusions
Tax benefits of a health insurance plan cannot be claimed for your taxable income, if: –
- The policy is purchased for your in-laws.
- No proof of insurance is presented.
- The mode of payment is cash. (Premium payments made through cheque or card are accepted for tax exemption)
- The premium was paid using the money you received as a gift.
The tax benefit will only be applicable if the premium is paid from your taxable income earned during that financial year.
Things to note before claiming deduction
There are various health insurance plans available for the individual as well as the family. It is important to assess your requirements before you buy a health plan. If you have bought a health plan, here are a few things that you need to know before claiming deduction: –
- Apart from tax exemptions on the premiums, you can also claim deduction for preventive health check-ups under Section 80D.
- You can buy a health policy for your parents and get an additional tax deduction on the premium paid. But, the maximum exemption for parents cannot exceed Rs. 25,000.
- To be eligible for tax exemption, premium payment should be made by any mode other than cash.
- Service tax charged on health plan premiums is not excluded from deduction.
Buying a health plan is always a wise decision, but with the various health insurance plans available, it can become a tricky affair to choose one. Hence, it is important to assess your requirements as well as compare the available health plans before buying a policy. When you buy a health plan, don’t forget the aforementioned tips to claim tax deductions on the premiums that you pay.