Learn about Health Insurance Tax Benefits

Health Insurance Tax Benefits

Life is full of uncertainties. With the kind of fast paced life we lead and the sedentary lifestyle that is followed is comes as a no surprise that more and more people are suffering from illnesses. Rising medical treatment costs can make severe dent in the financial savings of people. Health Insurance is an instrument which provides the sum assured in case of medical emergencies and provide respite to the people from the humongous medical treatment bills.

Types of Deduction:

There are four types of deduction available under Section 80(D). They are

  • Tax deduction on health insurance premium that has been paid for you and your family

  • Tax deduction on health Insurance premium paid for parents

  • Tax Deduction on preventive health checkup expenses

  • Tax deduction on medical expenses of super senior citizens

That’s not all. Apart from providing cover in cases of medical emergencies, they also provide tax rebate to the payer of the medical insurance policy under Section 80D. According to Section 80D of the Income Tax Act, premium that is paid towards medical coverage is deductible from the assessable income. The premium eligible for tax rebate is Rs25, 000 on health insurance for self and spouse and dependent children and an additional deduction for insurance of parents is available to the extent of Rs 25, 000 if the parents are less than 60 years of age. In case of parents being more than 60 years of age the deduction is Rs 50, 000. The deductions are available to person who pays the premium of health insurance for the family members irrespective of whether the members are dependent on him/her or not.

Special Deduction for Super Senior Citizens:

Super Senior citizens are citizens who are above 80 years of age. As the health risks increases with risk there are very few insurance providers who offer health insurance for super senior Citizens. Therefore a vast number of super senior citizens are not able to avail the tax benefits.

An amendment to the section 80 (D) in the Finance Act 2015 was introduced, the total deduction under the amendment allowed to the super senior citizen which included the premium payment and Medical Expenses is Rs 30, 000. The limit has been increased to Rs 50, 000 with effect from the financial year 2018-2019.

Section 80 (D): Deduction for Preventive Health Check-Up:

A new provision has been brought under Section 80(D) for health insurance for Preventive Health Check-Up. A deduction of Rs 5,000 has been allowed under the Section 80(D) for Preventive Health check-Up of the individual himself or that of his family members including his parents. This deduction applies from year assessment year 2013-2014 onwards. The expense can be claimed on an aggregate basis and not on individual basis. If a person pays for preventive health check up on himself and his wife and children and parents, the combined deduction he can avail of cannot be more than Rs 5,000.

Example of Tax Deduction under Section 80 (D):

Example: Mr. Akash is 63 years old. He has a medical insurance policy on his name, he pays a premium of Rs. 35,000 annually. He also pay premiums amounting to Rs. 27,000 for health insurance policy of his parents who are above 80 years of age. How much tax deduction can he get under section 80D?

Solution: Since he is a senior citizen (above 63 years), he can get a deduction of up to Rs. 30,000 only for paying premium amounting to Rs. 35,000 since the maximum deduction limit is Rs. 30,000.

His parents are super senior citizens and therefore he is eligible for a tax deduction of Rs 27,000 out of the maximum possible deduction of Rs. 30,000 since the premium he pays is only Rs. 27,000.

So, the total deduction that he can claim is (Rs. 30,000 + Rs. 27,000) that equals to Rs. 57,000.

Few Points before availing Health Insurance Tax Benefits 2018-2019:

  • Premium money needs to be paid in non-cash mode, any premium paid incash is not eligible for deduction under Section 80 (D)

  • Meaning of dependent children in case of Male child is that you can claim the benefit of paying premium upto 25 years of age, in case the child is 18 years and employed then the deduction can’t be claimed.

  • Meaning of dependent children in case of Female child is that you can claim the benefit of paying premium upto her Marriage and her employment status being unemployed.

  • Tax benefits cannot be claimed by you if you have paid premium towards your in-law’s health insurance premium

  • Tax benefit can be claimed towards premium and not for GST or service tax paid.

  • If the insured has purchased life insurance policy with a critical illness rider, the premium paid towards the critical illness rider can be claimed under Section 80 (D).

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