Tax Benefits of Health Insurance Plans

When it comes to medical costs in India, medical inflation and rising costs have made health insurance a necessity for everyone. Other than the obvious benefits offered by health insurance plans, they also come with tax benefits. Many people are not aware that their medical insurance plan can help save them money via various income tax benefits. So here is a guide on the tax benefits of health insurance plans. 

Health insurance and Section 80D: 

Anyone who has a medical insurance plan may claim tax benefits for the health insurance premiums paid in a single year under Section 80D of the Income Tax Act. These tax benefits extend to critical illness plans, riders, and top-up health plans.  

It is important to note that the income tax benefits offered under Section 80D are over and above those offered under the more popular and well-known Section 80C. 

Who can claim health insurance tax benefits under Section 80D? 

 Health insurance tax benefits under Section 80D may be claimed by any individual or Hindu Undivided Family (HUF). They can claim tax benefits on the health insurance premiums paid for their spouse, dependent children, parents, and themselves.  

Tax benefits under this section cannot be claimed by any other entity such as corporations and firms. 

What can be claimed as tax deductions under Section 80D? 

1. The premiums paid for a medical insurance plan for yourself or your family members can be claimed as a tax deduction.
2. The premiums paid for a medical insurance plan for your parents can be claimed as a tax deduction. Your parents do not have to be dependent on you to claim this deduction.
3. The payments made toward preventive health check-ups for yourself, your spouse, your children, and your parents can be claimed as a tax deduction.
4. The payments you made for the medical expenses of a super senior citizen (80 years and above) may be claimed. The tax deduction here is capped at Rs 30,000. 

Illustrative table for tax deductions under Section 80D 

Here is an illustrative table that gives the break-up of taxable deductions under Section 80D for health insurance plans: 

Scenario		A	B	C	D	E
Health insurance for		1. Individual (below 60 years) + spouse and dependent children    2. Parents (below 60 years)	1. Individual (below 60 years) + spouse and dependent children    2. Parents (above 60 years)	1. Individual (above 60 years) + spouse and dependent children    2. Parents (above 60 years)	Hindu Undivided Family (HUF)	Non-Resident Indian (NRI)
Toward premium payments for	Family + Individual	Rs 25000	Rs 25000	Rs 50000	Rs 25000	Rs 25000
	Parents	Rs 25000	Rs 50000	Rs 50000	Rs 50000	NA
Limit for payment for preventive health check-up	Family + Individual	Rs 5000	Rs 5000	Rs 5000	Rs 5000	Rs 5000
	Parents	Rs 5000	Rs 5000	Rs 5000	Rs 5000	NA
Maximum tax deductions on health insurance plans claimable (Not including preventive check-up)		Rs 25000 + Rs 25000 = Rs 50000	Rs 25000 + Rs 50000 =  Rs 75000	Rs 50000 + Rs 50000 =  Rs 100000	Rs 25000 or   Rs 50000	Rs 25000

Illustrative example: 

Mr Sapra is 35 years old and has a family health insurance plan for his spouse, child, and himself. He pays Rs 19000 as a premium. He also buys health insurance for his parents, who are both 62 years old, for which he pays Rs 17000 as a premium. So, Mr Sapra’s total premium payment for a financial year is Rs 36000. He gets full tax benefits for his total premium payment as he is well within the limit, as per the table above.  

Points to remember for claiming tax benefits on health insurance 

 Here are some points to keep in mind if you want to claim tax benefits for your health insurance: 

1. Do not pay health insurance premiums by cash. Make premium payments via cheque, credit or debit cards, bank drafts, bank transfers, UPI, eWallets, and so on. 
2. Payment of preventive health check-ups may be made in cash. There is no restriction on this payment. 
3. If you have a multi-year medical insurance plan, the tax benefits can be claimed proportionately over the tenure of the policy period. 
4. You cannot claim tax benefits for premiums paid for siblings, in-laws, friends, and so on. 
5. You will not be able to claim tax benefits if you cannot produce proof of payment (payment receipt). 
6. Your tax benefits are limited to the scope of the amounts specified under Section 80D of the Income Tax Act. You cannot claim over and above the capped amount, even if you pay more. 

Summing up 

Health insurance has the dual benefits of protecting your finances during medical emergencies plus tax benefits. Thus, health insurance plans are a great way to invest in your future. So, purchase a policy today!