List of 6 Tax Benefits on Health Insurance
As the importance of health and well-being takes centre stage, individuals are increasingly recognizing the need for robust health insurance coverage. Apart from providing financial security during medical emergencies, health insurance tax benefits in India offer an additional perk that often goes unnoticed – tax benefits.
In this blog post, we will delve into the various tax advantages associated with health insurance plan in India, shedding light on the key considerations that potential policyholders should keep in mind.
What is Section 80D?
Every individual or HUF can claim a deduction for medical insurance premiums paid in the financial year under Section 80D. This deduction is also available for top-up health plans and critical illness plans.
The best part is that it is over and above the Rs 1.5 lakh limit deductions claimed under Section 80C
Who is eligible for deduction under Section 80D?
- Individuals
- Hindu Undivided Family (HUFs)
Any other entity cannot claim this deduction. For example, a company or a firm cannot claim a deduction under this section.
What deduction is allowed under Section 80D?
- The following expenses are allowed as deduction under Section 80D:
- Medical insurance premiums paid for self and family
- Medical expenses incurred for senior citizens
- Individual or HUF taxpayers can claim deduction for the insurance premium payments made for:
- Self
- Spouse
- Dependent children
- Parents
Payments eligible as deduction under Section 80D
An individual or HUF can claim a deduction under Section 80D for the payments mentioned below:
- Health insurance premiums paid in any mode other than cash:
- Up to ₹25,000 paid for self, spouse, dependent children or parents
- Up to ₹50,000 if family or your parents are senior citizens (60 years and above)
Preventive health checkups (Cash payment allowed):
- Up to ₹5,000 for self, spouse, dependent children or parents
Medical expenses
- Senior citizens (resident aged 60 years or above) who do not have any health insurance can claim a deduction up to Rs 50,000 on the medical expenses incurred.
Note: While the Income Tax Act doesn’t explicitly define “medical expenditure,” it typically means costs like medical consultations, impairment aids, medicines, etc.
Contribution to CGHS/notified scheme
Individuals can claim a tax deduction of up to ₹25,000 for contributions made to the Central Government Health Scheme (CGHS) or any other notified scheme. However, any contribution made on behalf of parents is not eligible for this deduction.
What is a preventive health check-up under 80D?
The government introduced preventive health insurance tax benefit check-up deduction in 2013-14 to encourage citizens to be more proactive towards health buy Preventive health check-ups aim to identify any illness and mitigate risk factors at an early stage through frequent health check-ups.
Section 80D includes a deduction of Rs 5,000 for any payments made towards preventive health check-ups. This deduction will be within the overall limit of Rs 25,000/Rs 50,000, as the case may be.
This deduction can also be claimed either by the individual for himself, his spouse, dependent children or parents. The payment for preventive health check-ups can be made in cash
Deduction of Medical Expenses for Senior Citizens (Section 80D)
For the welfare of senior citizens (Resident + aged 60 or above) who don’t have health insurance a deduction of up to Rs. 50,000 can be claimed on the medical expenses incurred for them. However, if they already have health insurance and have made payments to keep it active, they won’t be eligible for this deduction.
Example: If you incurred Rs 65,000 for the medical expenses of your senior parents, you may claim Rs 50,000 as a deduction although they don’t have a health insurance policy.
Multi-year Health Insurance premium paid in lump-sum (Section 80D)
Sometimes, people buy multi-year health insurance plans because of the discounts offered. In this case, they pay the premium amount upfront. In that case, deduction is allowed proportionately under section 80D. However, this would again be subject to the limits of Rs 25,000 of Rs 50,000 as discussed above.
Example: Mr. A bought 2-year health insurance policy and paid Rs 30,000 upfront. In this case, Mr. A can claim Rs 15,000 as deduction under Section 80D in each of the two years.
Points to be remembered at the time of purchase of medical insurance for claiming 80D deduction
- A medical insurance premium paid for a brother, sister, grandparents, aunts, uncles or any other relative cannot be claimed as a deduction for taking tax benefits.
- Premium paid on behalf of working children cannot be taken for tax benefit.
- In the case of part payment by you and a parent, both of you can claim a deduction to the extent paid by each.
- The deduction must be taken without showing the service tax and cess portion from the premium amount.
- Group health insurance premium provided by the company is not eligible for deduction.
- Premium paid by any mode other than cash is allowed for deduction. Hence premium paid by credit card or other online mode is also allowed for deduction.
6 Tax Benefits on Health Insurance:
- Section 80D Deductions:
One of the primary tax benefits of family health insurance plans in India falls under Section 80D of the Income Tax Act. Policyholders can claim deductions on the premium paid for health insurance policies covering themselves, their spouse, children, and parents. The maximum deduction limit varies based on the age of the insured and their parents. - Preventive Health Checkup Expenses:
Health insurance policies often encourage preventive healthcare by covering the costs of regular health checkups. The expenses incurred on these checkups are eligible for tax benefits under Section 80D. This provision underscores the importance of early detection and preventive measures for maintaining overall well-being. - Critical Illness Cover:
Some health insurance plans offer coverage for critical illnesses, providing a lump sum payout upon diagnosis. The premium paid for these critical illness riders is eligible for tax benefits under Section 80D. This ensures that individuals not only receive financial support during challenging times but also enjoy tax advantages. - Tax Benefits for Senior Citizens:
Senior citizens often face higher healthcare costs. To address this, the government provides additional tax benefits for premiums paid on health insurance policies for senior citizens. The enhanced deduction limit aims to ease the financial burden on the elderly and promote comprehensive health coverage. - Tax Benefits on Premiums for Dependent Parents:
Individuals who financially support their parents can avail of additional deductions on the health insurance premium paid on behalf of their dependent parents. This provision acknowledges the responsibility shouldered by individuals caring for their aging parents. - Family Floater Policies:
Family floater Family health insurance plans health insurance policies cover the entire family under a single plan. The premiums paid for such policies are eligible for tax benefits under Section 80D. This not only simplifies insurance management but also ensures that families enjoy collective tax advantages.
Why Do You Get Tax Benefits on Health Insurance in India?
The rationale behind providing tax benefits on health insurance lies in the government’s emphasis on promoting healthcare and financial well-being. By incentivizing individuals to invest in health insurance, the government aims to increase the overall health quotient of the population while simultaneously reducing the burden on public healthcare infrastructure. Tax benefits serve as a powerful tool to encourage responsible financial planning and ensure that individuals prioritize their health and that of their loved ones.
Consult Finvest India to Understand Possible Tax Benefits on Your Health Insurance:
Navigating the intricacies of tax benefits on health insurance can be challenging. To ensure that you maximize your benefits and make informed decisions, consider consulting Finvest India. Their team of financial experts can provide personalized guidance based on your specific needs and financial situation. From understanding the nuances of Section 80D to exploring the most tax-efficient health insurance plans, Finvest India is your trusted partner in securing not just your health but also your financial future.
Conclusion:
In the quest for comprehensive health coverage, it’s crucial not to overlook the added advantage of tax benefits. The various provisions under the Income Tax Act make health insurance not only a prudent financial decision but also a tax-efficient one. By investing in the right health insurance plan and leveraging available tax benefits, individuals can safeguard their health and financial well-being simultaneously. Take the proactive step today, explore the tax benefits on health insurance, and secure a healthier and financially sound future for you and your family.
