Under section 80D (of the Income Tax Act, 1961), you can avail tax deductions on the premium amount of your medical insurance. It is applicable on both medical insurance for individuals and families. Such deductions can be helpful as you can reduce the financial burden of your medical expenses as well as get some relief in the form of tax deductions.
The government deems the premium amount paid by policyholders as an investment. For this reason, there are different types of tax deduction available on health insurance premiums. The tax deductions are available of all types of health insurance policies – be it for individuals or families.
There are, of course, some terms and conditions associated with such tax deductions. So, it is a good idea to keep oneself informed about the latest information concerning tax deductions for health or medical insurance.
Deductions for Individuals
Individuals can claim tax deductions of up to INR 25000 for the medical insurance of self as well as their spouse and any dependent children. For those who fall under the category of senior citizen, the deduction limit is up to INR 50,000. You can claim such deductions every financial year.
Deductions for Medical Insurance of Parents
Individuals can get further tax deductions of up to INR 25000 for the health insurance of their parents. But this is only applicable if the parents are below 60 years of age.
If the parents are over the age of 60 then individuals can get benefits of tax deductions of up to INR 50,000. If the individual and the parents are both over the age of 60 then the limit for tax deductions is INR 100,000.
Such deductions are also possible even if the parents are not dependent on the child paying for their insurance.
Deductions for Health Checkups
Individuals can avail tax exemptions every year on health checkups for up to INR 5000. Individuals can avail this for themselves, spouse, kids, and the parents. But this exemption is part of the deductions of INR 25000 for individuals.
The amount of INR 5000 is the overall limit. You cannot use it for every dependent family member separately including for self. You cannot also claim tax deductions if the Health Insurance benefits were utilized by your siblings if applicable to your policy.
Deductions for Hindu Undivided Family
For an individual from a Hindu Undivided Family (HUF), the deduction limit is INR 25000. But you can further get deductions of INR 50000 if the parents are 60 years of age or older.
You can also avail of this additional deduction of INR 50000 if any medical expenses have been paid for the health issues of a very old or senior citizen and if no expenses have been incurred for the health insurance of that person.
More on Section 80D
Section 80D is primary for medical/health insurance unlike section 80C, which deals with different investments and deductions.
Under section 80D, you will not be able to avail of the deductions if you have paid the premium amount in cash. You can pay the premium by other means such as a cheque, demand draft, internet banking, and credit cards. With so many payment options, it is unnecessary to lose the tax deduction benefits simply because you paid the premium in cash.
But if you paid cash for claiming preventing medical checkups, the amount spent may qualify for tax deductions.
There is also no deduction available on the service tax you paid on your health insurance.
Other Tax Benefits Related to Health Insurance
Section 80DD offers deductions for individuals who take care of a disabled relative or family member. The maximum limit for such deductions is INR 75000. In case the individual is caring for a relative suffering from an extreme form of disability then the maximum deduction amount is INR 125,000.
Under section 80DDB, you can claim deductions for the treatment of self or a family member suffering from a serious illness. The deduction amount is INR 40000 or the actual expense (whichever is lower). The deduction is INR 100,000 or the actual expense (whichever is lower) for senior citizens. For such deductions, serious illness refers to some form of neurological disorders, cancers, renal failure, and others.
There are tax deductions available on add-on covers such as for critical illnesses and others, which are a part of life insurance and not basic health plans. But this may depend on your insurer. So, inquire about it at the time of buying your health cover.
It can get a bit difficult for a layperson to remember about the different types of deductions. But it is an important aspect of your financial planning.
Taxpayers and policyholders can obtain the correct information from their insurers, accountants, or tax consultations about such deductions. With the right information at your disposal, you can make smart choices about your health insurance and also enjoy certain tax benefits.
Your health insurance is an investment toward your health. It is not really an investment per say. But to encourage more citizens to avail the benefits of health insurance, the government offers attractive tax deductions on the premium amount and certain other expenses. But you shouldn’t buy health insurance for tax benefits. You should choose a medical insurance plan based on the health needs of you and your family.
The fact that you get to enjoy certain tax deductions on it is just an added bonus.