A health insurance policy is one of the best financial investments that will help everyone cover unforeseen medical expenses. However, many people prefer to bear the cost of medical treatment from their savings. Therefore, to tackle the issue of people preferring to drain savings rather than buy health insurance policies the government has introduced income tax benefits on health insurance purchases. The tax benefits are available under Section 80D of the Income Tax Act, 1961.
Buying a health insurance plan is beneficial as it offers tax benefits as listed in the table below.
| Particulars | Tax Benefit available under Section 80D of the Income Tax Act, 1961. |
|---|---|
| Buying a health insurance policy for yourself, if you are less than 60 years of age + Spouse (<60 years of age) + Dependent children up to the age of 25 years | Rs 25,000 |
| Buying a health insurance policy for dependent parents if both of them are less than 60 years of age | Rs 25,000 |
| Buying a health insurance policy for senior citizen parents if any one of your parents is more than 60 years of age | Rs 50,000 |
| Buying health insurance policies for self, spouse, dependent children up to the age of 25 years + dependent parents (who are less than 60 years of age). | The total tax benefit that can be availed is Rs 50,000 (Rs 25,000 for self, spouse and dependent children and an additional Rs 25,000 for dependent parents) |
| Buying health insurance policies for self, spouse, dependent children up to the age of 25 years + dependent parents with at least one of them > 60 years of age. | The total tax benefit that can be availed is Rs 75,000 (Rs 25,000 for self, spouse and dependent children and an additional Rs 50,000 for dependent parents) |
| Buying health insurance policies for self and spouse where either or both are > 60 years of age + dependent parents. (Both you and your parents are senior citizens) | The total tax benefit that can be availed is Rs 1,00,000 (Rs 50,000 for self and spouse and an additional Rs 50,000 for dependent parents) |
| Members of HUF and Non-Resident Indians | Rs 25,000 |
| For preventive health check-ups | Upto Rs 5,000 |
Thus, the above table exhibits the numerous scenarios within which the policyholder can avail of tax benefits offered by the government under Section 80D of the Income Tax Act, 1961. Thus, it is recommended to check income tax benefits on health insurance before investing.
Tax savings are possible by investing in certain financial tools. Purchasing a health insurance premium and paying the premium amount is one way of saving tax under section 80D of the Income Tax Act, 1961.
So, the maximum amount of health insurance tax benefit 80D would be Rs. 1 lakh if you and your dependent parents are more than 60 years of age (Rs. 50,000 for yourself/spouse + Rs. 50,000 for dependent parents).
However, if you are less than 60 years of age but either of your parents is more than 60 years of age, then the maximum amount of health insurance tax benefit 80D would be Rs 75,000 (Rs. 25,000 for yourself/spouse + Rs. 50,000 for dependent parents).
However, if you are less than 60 years of age and both your parents are less than 60 years of age, then the maximum amount of Income tax benefits on health insurance for senior citizens would be Rs 50,000 (Rs. 25,000 for yourself/spouse + Rs. 25,000 for dependent parents).
Section 80D of the Income Tax Act 1961 deals with offering tax benefits to an individual. This section offers tax relation up to Rs. 25000 for the premiums paid for the health insurance policy in a policy year. This tax benefit increases up to Rs. 50000 for individuals paying health insurance premiums for parents who are senior citizens. Senior citizen refers to the age of parents being more than 60 years.
Thus, individuals paying for health insurance premiums either for yourself, your spouse and dependent children up to the age of 25, and parents can avail of tax deduction under Section 80D of the Income Tax Act 1961.
Health Insurance tax benefit under section 80D allows tax deductions for premiums paid towards the purchase of a health insurance policy. All types of premiums whether single or regular premiums are eligible for tax deduction. The deduction amounts are as follows.
| Beneficiary | Age Criteria | Tax deduction allowed |
|---|---|---|
| Self, Spouse, and dependent children | Below 60 years of age | Rs. 25,000 |
| Self, Spouse | 60 years and above | Rs. 50,000 |
| Parents who are not senior citizens | Below 60 years of age | An additional tax deduction of Rs. 25,000 allowed |
| Parents who are senior citizens | 60 years and above | An additional tax deduction of Rs. 50,000 allowed |
There is a difference between the benefits offered by Section 80D and Section 80C of the Income Tax Act 1961. The following table shows the distinction between the benefits received from each of these sections.
| Particulars | Health insurance tax benefit Section 80D | Benefits under Section 80C |
|---|---|---|
| Deduction | Deductions are available for health insurance and preventive health care check-ups | A tax deduction is available on specified investments and expenses |
| Purpose | To encourage investing in health insurance and avail preventive health check-ups, upto Rs 5000 within the total 80D limit. | To encourage savings and investments for longer tenure. |
| Maximum Deduction Allowed | 1). Rs 50,000 – in case of health insurance purchased for self, family, and parents aged below 60 years,
2). Rs 75,000- in case either of your parents is> 60 years of age 3). Rs 1,00,000 if both you and your parents > 60 years of age. |
Rs. 1,50,000 in the Old Tax Regime for investing in specific investments such as Life Insurance policies, ELSS (Equity Linked Savings Scheme), PPF (Public Provident Fund) etc. |
| Mode of Payment | Cash transactions are not allowed premiums to be paid only through cheque or digital medium, except for preventive health check-ups in some cases. | Cash, as well as non-cash transactions, are allowed. |
| Investment instruments | Only health insurance policies or life insurance policies with health riders (add-ons). | Open to investment in diverse and financial options. |
| Effect on Taxable Income | The taxable income amount is reduced by the deduction amount claimed under the Old Tax Regime. | Taxable income is reduced by the amount invested in the financial tool (up to the maximum deduction limit) under the Old Tax Regime. |
| Applicable to | Individuals and Hindu Undivided Family | Individuals and Hindu Undivided Family |
Yes, you are eligible to receive income tax benefits for a Senior Citizen Health Insurance Plan. If you purchase it for your parents, who are more than 60 years of age, you can get an Income Tax Benefit under section 80D upto Rs 50,000 which is over and above your 80D limit of Rs 25,000, in case you are less than 60 years of age.
However, if you are more than 60 years of age, you can avail of a Senior Citizen Health Insurance Plan for yourself and get an Income Tax Benefit under section 80D upto Rs 50,000 for the premium payment of the same, under the Old Tax Regime.
The tax benefit is offered by the government to propagate the importance of having a health insurance policy.
To promote the importance of health insurance coverage and to boost the purchase of health insurance policies for self, family, and parents the government of India has introduced multiple tax benefits under section 80D of the Income Tax Act 1961. So purchasing a health insurance plan for your parents is beneficial for 2 reasons namely:
The tax benefits available for parents’ health insurance plan are as under
Any individual is eligible to receive tax benefits if he/she has purchased a health insurance policy. Section 80D of the Income Tax Act states the following procedure for filing claim deductions for medical insurance premiums. Here's a guide to accessing this tax benefit:
Submit your tax return along with relevant forms and supporting documents to the Income Tax Department.
Apart from the above-mentioned process, there are certain important points that one needs to note down. Here are some essential points about Section 80D:
Income tax benefits on health insurance for senior citizens U/S 80D are available for premiums paid for parents. It means, that an individual can buy a health insurance policy for parents and avail tax benefits for the same.
The tax benefits that an individual can avail under section 80D of the Income Tax Act 1961 for the health insurance purchased for parents are as under:
Premium payment receipt of a health insurance plan is the only document that you need for claiming the tax deductions under section 80D of the Income Tax Act, 1961.
Sometimes your employer might ask you to also submit a copy of the policy document showing your name along with the members covered under the plan, their age, and your relationship with the members covered, i.e., Spouse, Children, etc.
In case you are paying premiums for your parent’s health insurance policy, you should ask the insurance company for an 80D certificate stating premium payment has been made by you. Here you have to provide the insurance company with information about the payment source.
For example, the Credit Card in your name, which was used for making a premium payment, or your bank account, which was used for making online or cheque payment.
Read the policy document carefully to know the tax exemptions.
Rs 1,00,000 is the maximum deduction available under section 80D, considering you and your parents both are senior citizens.
This benefit is also available for HUFs (Hindu Undivided Family) for premium payment done towards insuring the health of any member of the Hindu Undivided Family.
Premiums payment must be made in any mode other than cash to avail tax deduction.
Payment done towards Preventive Health checkups in cash is accepted.
The tax benefits available under Section 80D is over and above the Rs. 1.5 Lakh limit available under Section 80C tax.
In Short,
Health insurance plans are the best option for protecting your savings from medical-related expenses. It also helps you bring down your tax liability by allowing you to deduct up to Rs. 1 lakh from your taxable income under section 80D of the Income Tax Act, 1961. It is a very effective tax planning instrument making it a must-have for a financially and healthy secure future.
Thus, a health insurance plan is not merely an investment tool but has two big advantages namely: financial protection in case of medical emergency and health insurance tax benefit under section 80D of the Income Tax Act 1961. Therefore, purchasing health insurance plans for self, family, and parents must be encouraged as you can have peace of mind without worrying about finances and savings.