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Mediclaim Deduction

Tax Deductions on Health Insurance

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Do you know that you can get dual protection for your savings with a comprehensive health insurance plan? Here is how – firstly, it covers the medical expenses you incur in a year. Secondly, you get a chance to save tax! The premium you pay towards a health insurance policy qualifies for tax deduction under Section 80D of the Income Tax Act 1961. That is, it reduces your tax liability. Therefore, health insurance is a vital investment to grow your savings and ensure your financial stability.

Let us understand section 80D benefits and how you can enjoy tax benefits with health insurance plans.

What is Section 80D of the Income Tax Act of India?

Section 80D is a provision under the Income Tax Act of India that allows a person, an individual or HUF (Hindu Undivided Family), to claim income tax deductions from the taxable income for the payment of health insurance premium. The premium paid for a health insurance policy for self, dependent parents, spouse, and children is exempt from tax. Under this section, health insurance premium, contributions to the Central Government Health Scheme, and preventive health checkups qualify for a tax deduction under section 80d.

However, the amount of income tax benefits in individual and family health insurance depends on the insured's age and income. Opt for health insurance as it enables you to save money considerably under section 80D.

How does Section 80D Works in Mediclaim Deduction?

Persons Covered Exemption Limit Total
Self and family Rs 25,000 Rs 25,000
Self and family + parents Rs 25,000 + Rs 25,000 Rs 50,000
Self and family + senior citizen parents Rs 25,000 + Rs 50,000 Rs 75,000
Self (senior citizen) and family + senior citizen parents Rs 50,000 + Rs 50,000 Rs 1,00,000

How to Avail Tax Deductions in Health Insurance?

Read here how you can avail of benefits against under health insurance policy:

Tax Reduction on Health Insurance Premium

Health insurance premium refers to the sum of money you have to pay to the insurance company to get the coverage under a mediclaim policy. Section 80D of the Income Tax Act allows you to get a tax deduction up to Rs 25,000 per year for any individual and family health insurance policy covering self, spouse, and children. Senior citizens can get a deduction up to a maximum of Rs 50,000 per year.

Example:  

Rohit (aged 40 years) opted for a health insurance plan covering self, wife (36 years), and 8-year old child. He pays an annual premium of Rs 25,850. He also pays a health insurance premium of Rs 45,000 for the mediclaim policy covering his elderly father (67 years) and mother (62 years). 

  • The deduction Rohit is eligible to get for the health insurance policy that covers self, spouse, and child is up to Rs 25,000. 
  • The maximum deduction he is eligible to get for the mediclaim for parents is up to Rs 50,000. So, the deduction he can claim in this case is Rs 45,000. 

The total deduction he becomes eligible for the year is up to 70,000. 

How to File Tax Return?

Filing a tax return is not a daunting task. Following simple steps can ease the process:

  • Visit the official portal of the Income Tax Department.
  • Go to the e-file section, select the assessment year and the correct ITR form.
  • Choose 'Original/Revised Return' under ‘Filing Type’ and 'Prepare and Submit Online' under ‘Submission Mode’.
  • Verify the pre-filled data and bank details. Click ‘Continue’. 
  • Upload Digital Signature Certificate (DSC). Click ‘Submit’. 

A sound health insurance policy provides you and your family a comprehensive medical coverage and supports you in your tough time. It bears your medical expenses, and helps you access the best possible treatment. Its benefits are not limited to this; along with the right treatment and financial security, you are entitled to get a mediclaim deduction under 80D of the Income Tax Act. That is why investing in the right health insurance offers you a double bonanza.

Things to Note Before Filing for Tax Return

  • It is necessary to pay the premium through net banking, credit card /debit card, online mode, or another payment gateway for getting the tax benefits. 
  • Any payment in cash will not qualify for a tax deduction. 
  • Premium paid for siblings, grandparents, paternal and maternal relatives does not qualify for a tax deduction. 
  • Premium that parents pay on behalf of working children cannot be considered for tax benefit.
  • The group health insurance premium paid by the company on behalf of the employees covered under the group is not eligible for deduction. 

How to Maximize Health Insurance Tax Benefits?

The following steps can help maximize tax deductions in health insurance:

  • If an individual and spouse both are earning members, they can opt for a health insurance plan, and can split the premium amount by paying individually to the insurer. The individuals will be issued tax certificates, and they can claim a tax deduction on the health insurance premium, up to the specified limit.  This way, they can lower the tax liability and get the deductions up to the maximum specified limit. 
  • One can include parents in a family floater plan to get comprehensive protection for the family and get a total tax deduction up to Rs 50,000, provided the individual and parents are below 60 years.
  • The ideal way to save maximum tax is to opt for a health insurance plan covering senior citizen parents. Thus, one is entitled to an additional deduction of up to Rs 50,000. So, the total deduction is up to Rs 75,000. 
  • If the proposer and insured covered in a health insurance policy are above 60 years of age, in that case, the maximum deduction limit is up to Rs 1,00,000.

Example:

An employee is covered under a health insurance policy, including the spouse and children. The existing health insurance policy has a sum insured up to Rs 10 lakh.

Maximum tax deduction limit: Rs 25,000

The health insurance premium paid: Rs 15,280

The unutilized Section 80D Limit: Rs.9720 

To maximize Section 80D benefits, the person can go for a cashless *OPD offering of Rs 15,000 at a premium of Rs 11,000 (with GST), thus saving Rs 4000. Besides getting the cashless facility and enhanced coverage, the person also saves Rs 2,916 on tax under the section. 

*Please refer to the policy T&C

Tax Benefit on Single-Premium Mediclaim Policy

Suppose a person opts for a mediclaim policy with a validity of more than one year and pays the premium as a lump sum amount. In that case, the mediclaim deduction is calculated by dividing the total premium amount paid by the number of policy years. The health insurance tax benefit cannot exceed the limit of Rs.25,000 or Rs.50,000, as applicable.

Bottom Line!

When you have financial responsibilities towards your family, opting for health insurance serves the dual purpose of securing your finances against rising medical bills and reducing the tax burden. The income tax act has various provisions that make you eligible for tax benefits under the different sections, including Section 80D. Opt for Care- a comprehensive health insurance policy offered by Care Health Insurance (formerly Religare Health Insurance) that gives you maximum coverage with a of tax benefits.

*Note: Tax reduction on health insurance premium is subject to rules and regulations of the Income Tax Act. Please refer to them before filing the return.

FAQs

How much tax exemption can I avail under section 80D? 

An individual who pays the premium towards a health insurance policy is eligible to get maximum medical insurance tax exemption up to Rs 1,00,000 per year if the proposer and the insured are above 60 years of age. 

I made cash payments for my health insurance policy, can I still avail tax exemptions? 

No. Policyholders are not eligible to get a tax deduction if they have made a cash payment for the health insurance premium. To avail of the medical insurance tax benefit, it is necessary to opt for a payment mode other than cash, such as net banking or credit/debit card.

My children aren’t dependent on me; can I claim tax exemptions for their health insurance under section 80D? 

Parents cannot get section 80D benefit if the health insurance premium is paid on behalf of working children.  

Can I avail tax benefits for more than one health insurance policy? 

One can get a tax deduction on the premium paid for more than one health insurance policy, subject to the maximum tax deduction limit, as applicable. 

 

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