What is the Percentage of Tax Benefits under Health Insurance Premiums?

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What is the Percentage of Tax Benefits under Health Insurance Premiums?

The Income Tax Department is the apex body for tax collection in the country. Every individual falling under the taxable income has to pay the tax as per their tax slab. Since people have different incomes, expenses and investments, the government of India has several provisions of tax deductions under the Income Tax Act where taxpayers can get tax deductions.

Premiums paid towards health insurance plans also fall under this category. As per the Section 80D of Income Tax Act, if you are paying health insurance premiums for yourself, your spouse, your parents, or your dependent children, you are eligible to apply for tax deductions at the time of filing income tax. Read on to learn how health insurance helps you get tax benefits and things to be careful about while paying income tax.

Health Insurance Tax Benefit: Section 80D

When filing your income tax returns under the Old Tax Regime, you can avail of tax deductions under Section 80D of the Income Tax Act of 1961 which allows health insurance tax benefits. Any individual in India or HUF (Hindu Undivided Family) can apply for tax deductions u/s 80D of the Income Tax Act of 1961 if they are paying health insurance premiums.

One can avail a tax deduction of up to ₹1 lakh under this section. Individuals below the age of 60 can claim tax deductions up to ₹25,000, and those above 60 years can avail of a tax deduction of up to ₹50,000. Not just with regular health plans, but the tax deduction is also available for top-ups and critical illness covers.

Note: You need not worry about having already claimed tax deductions under Section 80C of the Income Tax Act of 1961. The tax deductions under Section 80D of the Income Tax Act are over and above the limit of Section 80C.

Preventive Health Check-Ups

The Government of India announced the inclusion of preventive health check-up tax deductions back in 2013-2014. It was introduced so that individuals become more aware of the need for preventive health check-ups. The idea behind providing preventive health check-ups benefit is to detect any critical illnesses and diseases at an early stage so one can get the required treatment on time and avoid further health complications.

Any taxpayer can claim a tax deduction of up to ₹5,000 if he/she for preventive health check-ups. You must remember that this deduction is included in the limit of Section 80D of the Income Tax Act of 1961.

>> Also Read: Health Insurance Tax Deduction Under Section 80D

How does Tax Deduction Work under Section 80D?

Let's understand the working of tax deduction under Section 80D of the Income Tax Act through a few examples here:

Example 1:

Reema who is 45 years old, purchased a health insurance plan for herself at a premium of ₹30,000 and a medical plan for her father (61 years) at a premium of ₹40,000. So, at the time of filing income tax, Reema is eligible to avail of a tax deduction of ₹25,000 for her health insurance plan and ₹50,000 for her father's medical plan. That makes a total tax deduction of ₹75,000.

Example 2:

Reema went for a preventive health check-up of ₹5,000. At the time of filing the income tax, she can claim a tax deduction of ₹5,000 under Section 80D of the Income Tax Act of 1961.

So, Reema was able to save a total of ₹80,000 from her total payable tax. Since the maximum limit of Section 80D, tax deduction is 1 lakh, Reema was able to save ₹80,000.

Eligibility for Section 80D

Individuals or members of Hindu Undivided Families (HUFs) paying health insurance premiums for oneself/spouse/parents/dependent children are eligible for income tax deductions u/s 80D of the Income Tax Act of 1961.

The following health plan expenses are covered under the Section 80D:

  • Health insurance premium for dependent family or self
  • Health insurance premiums for government health schemes
  • Senior citizen health scheme premium for those who are not covered under any health insurance schemes
  • Preventive health check-up expenses

Deductions under Section 80D

Check out the table below to have a quick look at the deductions offered under Section 80D of the Income Tax Act of 1961:

Policyholders Deductions for self and family Deductions for parents Preventive Health Check-Ups Deductions limit
Self and family below 60 years of age ₹25,000 - ₹5,000 ₹25,000
Self, family, and parents below 60 years of age ₹25,000 ₹25,000 ₹5,000 ₹50,000
Self and family below 60 years of age and parents above 60 years of age ₹25,000 ₹50,000 ₹5,000 ₹75,000
Self, family, and parents above 60 years of age ₹50,000 ₹50,000 ₹5,000 ₹1,00,000
HUF members below 60 years of age ₹25,000 ₹25,009 ₹5,000 ₹25,000
HUF families above 60 years of age ₹50,000 ₹50,000 ₹5000 ₹50,000

Multi-year Health Insurance Premium paid in Lump-sum

A multi-year or long-term health insurance policy is also eligible for income tax deductions u/s 80D. You would be allowed to make a claim for a proportionate amount out of the total premium you have paid in one financial year. For example, for a 3-year policy, if you have paid the premium of ₹51,000, you will be able to make a claim of ₹17,000 every year for the next 3 financial years.

Important Points to Remember When Claiming Health Insurance Tax Benefit

There are a few things that you must take care of when claiming health insurance tax benefits. These include:

  • Before you start filing the tax deductions for health insurance premiums, make sure to read the policy document carefully.
  • In order to better support the documents of the health insurance premium payment, do not make payments in cash, opt for payment through credit/debit card or net banking or cheque. 
  • No matter the total amount of health insurance premium you pay, the maximum tax benefit limit under Section 80D of the Income Tax Act of 1961 is ₹1 lakh.
  • Tax deduction for health insurance premiums is available for both Indians and HUFs (Hindu Undivided Families).
  • In order to avail of tax benefits against preventive health check-ups, payment for the same can be done in cash.
  • Tax deductions under Section 80D of the Income Tax Act of 1961 are over and above the limit of Section 80C of the Income Tax Act of 1961.

In a Nutshell! 

A health insurance plan is one of the essential investments advised to everyone, especially if you have a number of other financial commitments in life. Not only does health insurance premium help you during times of medical requirements, but also helps you save on the other hand. Make sure to file deductions under Section 80D of the Income Tax Act of 1961 when filing income tax. Stay safe, and stay healthy!

Disclaimer: Plan features, benefits, coverage, and underwriting of claims are subject to policy terms and conditions. Please refer to the brochure, sales prospectus, and policy documents carefully.

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