It is wise to have health insurance in place to minimise the risk of getting stuck with hefty medical bills. However, many people in India spend all their money or borrow money to pay medical bills, and in the process, they end up being financially stressed instead of seeking insurance.
The government provides certain tax exemptions under Section 80D of the Income Tax Act, 1961, to encourage more citizens to purchase health insurance. Keep reading to know how this provision aims to make health insurance more appealing and financially accessible by providing tax relief for premiums paid.
What is Section 80D of the Income Tax Act Under Health Insurance?
Individuals or Hindu Undivided Families (HUFs) who have taken a health insurance policy can claim deductions on the premiums paid under Section 80D of the Income Tax Act. The Government of India allows tax deductions in a financial year for health insurance premiums. This limit can increase up to ₹1 Lakh for policyholders.
As a policyholder, you can claim deductions for yourself and dependent children, parents, and your spouse. Non-resident Indians (NRIs) who pay taxes in India can also claim this deduction, though it does not extend to entities like firms or companies.
What are the Benefits of Section 80D in Health Insurance?
Here are some major benefits you can enjoy under Section 80D when you have a health insurance plan:
- Tax Deductions
Section 80D of the Income Tax Act allows you to get a deduction on the premiums you pay for your health insurance policy. This applies to both your insurance and that of your dependent family members. For individuals under 60 years old, you can claim a maximum deduction of ₹50,000. If you are 60 or older, the deduction limit increases to ₹75,000.
- Coverage for Preventive Health Check-ups
Under Section 80D, you can also claim deductions for expenses related to preventive health check-ups. These check-ups are crucial for maintaining good health and catching potential issues early, which helps in timely treatment and avoiding more serious problems.
- Additional Deductions for Parents
Your parents are likely to develop one illness or the other as they grow older and may require more medical attention. Section 80D enables you to claim the deduction for the health insurance premium paid towards your parents, irrespective of their age. This ensures they receive the adequate medical care they require and also assists you to bear the costs.
- Pre-existing Disease Cover
You might pay higher premiums if your health insurance plan includes coverage for pre-existing conditions. Section 80D of the Income Tax Act lets you claim deductions on these higher premiums, making it easier to manage the cost while ensuring comprehensive coverage.
- Critical Illness Cover
Some of the key diseases that are usually covered by health insurance plans are critical illnesses that include heart attack, cancer, and stroke. These plans often come with a higher premium. Section 80D allows you to claim a tax deduction on these premiums as well, which will help you save money while getting the right coverage.
What Types of Health Insurance Plans are Covered Under Section 80D?
The following are the different types of health insurance plans covered under Section 80D:
- Individual Health Insurance Policy
An individual health insurance policy is tailored for young people to provide coverage against various health issues, including illnesses, hospital stays, childbirth expenses, and major and minor health conditions that may occur throughout life.
Although these policies are primarily designed for individuals without dependents, they can be customised to include coverage for family members such as senior parents, spouses, and children.
- Family Floater Health Insurance Policy
A family health insurance is one in which the sum insured is available to all family members, including your parents. While this type of policy might be cheaper to manage, it might not be the best policy for your parents.
If multiple claims occur in a year, the total coverage amount might be quickly exhausted, leading to underpayment for subsequent claims. This plan is ideal for young families with little health concerns or cases where several members of the same family require insurance.
- Senior Citizen Health Insurance Policy
Senior citizen health insurance policies are designed specifically for individuals over 60 years old. These plans cover many health issues common in older age, such as chronic diseases and age-related complications.
Some senior citizen policies offer additional benefits like home hospitalisation and AYUSH treatments, making them particularly suitable for your parents.
How Much Deduction is Available Under Section 80D?
The following table mentions the tax benefit under Section 80D of the Income Tax Act, which you can avail of with health insurance:
Scenario | Deduction under 80D |
Self and family (all members below 60 years) | ₹25,000 |
For self and family + parents (all members below 60 years) | ₹25,000 + ₹25,000) = ₹50,000 |
For self and family (all members below 60 years) + senior citizen parents | ₹25,000 + ₹50,000 = ₹75,000 |
For self and family (with the eldest member above 60 years) + senior citizen parents | ₹50,000 + ₹50,000) = ₹1,00,000 |
Key Points to Note When Claiming Deductions Under Section 80D
Here are important things to remember when claiming deductions under Section 80D:
- Cash Payments: Health insurance premiums paid in cash cannot be claimed for deductions under Section 80D.
- Shared Premium Payments: If an individual and their parent contribute to paying medical insurance premiums, each can claim a tax deduction for their respective share under Section 80D.
- Ineligible Premiums: Premiums paid for siblings, grandparents, uncles, and aunts do not qualify for tax deductions under Section 80D.
- Working Children: Premiums paid for working children are not eligible for deductions under Section 80D.
- Group Insurance: Premiums for group health insurance paid by an employer are not eligible for Section 80D deductions.
- Service Tax and Cess: Section 80D does not provide deductions for service tax and cess added to health insurance premiums.
Hence, under health insurance, Section 80D of the Income Tax Act benefits you. With this plan, you can reduce your taxable income by claiming deductions on premiums for yourself, your family and even your parents.
This section supports various health insurance plans, making healthcare more affordable. Remember to monitor premium payments and ensure that they are paid through the right channels to maximise these deductions.