Life insurance or health insurance has got two benefits to offer to the insured person one is financial security during an emergency and the other is tax deduction when filing Income tax return. Under section 80 D of the income Tax Act health insurance acts as a very efficient tool in tax saving. It is a must in your investment portfolio but more than half of the Indian population are not covered by health insurance. During medical emergencies, these people use their saving or borrow money for medical treatments. 

The Income Tax Act under section 80D works very simply. All you have to do is pay regular premiums to the insurer and in return, the insurer promises to cover the insured financially in case of a medical emergency. There’s more to health insurance than just helping you at the most critical times. It reduces your annual income tax return you are liable to pay for the financial year subject to the premium paid for the same. 

If you are  a taxpayer who diligently pay your Income tax returns then you must know how you can benefit from buying a health insurance under section 80D of Income Tax Act. Phoenixtax –tax consultants can help you with the process of Income tax return in Chennai and give you every knowledge about the benefits a health insurance policy can offer a taxpayer.

What is section 80D?

Section 80D of the Income Tax Act gives tax benefits to every individual or the people who belong to HUF who has bought a medical health insurance policy for them as well as their family can guarantee Tax deduction up to INR 25,000. This Policy permits you to get tax deductions on expenses made for medical insurance for you and for your family, spouse, kids, parents, and Hindu Undivided Families (HUF) can guarantee.

Deductions available under Section 80D Income Tax Act

  • Health Insurance is paid for self, family up to INR 25,000 and for parents under 60 years old up to INR 25,000, the deduction under Section 80D will be up to INR 50,000. 
  • Health Insurance is paid for self, family up to INR 25,000 and for parents over 60 years old up to INR 50,000, the deduction under Section 80D will be up to INR 75,000. 
  • Health Insurance paid for self, family (over 60 years) is up to INR 50,000 and guardians over 60 years old is up to INR 50,000, the deduction under Section 80D will be up to INR 1,00,000. 
  • For Hindu Undivided Family (HUF) the health insurance paid for self, family is up to INR 25,000, and for parents is up to INR 25,000, the deduction under Section 80D will be up to INR 25,000. 
  • For Non-Resident Individuals the health insurance paid for self, family is up to INR 25,000, and for parents up to INR 25,000, the deduction under Section 80D will be up to INR 25,000.

Eligibility for deduction under section 80D of the income tax act

Deduction under section 80D can be benefited by all citizens for making payments of any expense or health insurance or life insurance policy profited for the sake of: 

  • The insured himself
  • The spouse of the insured
  • Dependent children of the insured
  • Parents of the insured

How much tax benefits an individual can get from health insurance?

EligibilityDeduction under section 80D
Self and Family (All members below 60 years₹25,000
For Self and Family + Parents (All members below 60 years)₹25,000 + ₹25,000) = ₹50,000
For Self and Family (all members below 60 years) + Senior Citizen Parents₹25,000 + ₹50,000 = ₹75,000
For Self and Family (with eldest member above 60 years) + Senior Citizen Parents₹50,000 + ₹50,000) = ₹1,00,000

Who can Claim Health Insurance?

A citizen can claim for the deduction under section 80D of the Income Tax Act. The medical insurance expense paid for the accompanying individuals in a family are qualified for allowances:

  • Self
  • Spouse
  • Children
  • Parents

Documents required to claim a deduction

The major documents needed to claim the deduction are your health insurance installment receipt and your health insurance policy copy which shows the name of the family members and their relation and age. In the event of expense paid for parents’ policy, the proposer ought to request 80D endorsement from the insurance agency by giving the installment subtleties in his name.

Tax benefits of health insurance

If an individual’s annual income falls under tax liability, then by having a health insurance policy you can claim income tax exemption to some extent. Every life insurance or health insurance policy allows you to claim a tax deduction for the premium payment you have done. 

When buying medical insurance policies for your parents who are senior citizens (above age 60) make sure that you include adequate coverage. Instead of looking for policies that offer higher tax benefits, try to buy policies that cover all medical conditions with reference to your parent. Doing so will fetch you maximum benefits from the health insurance policy you have bought. 

  • Tax Saved: The maximum amount that one can save under section 80D of the Income-tax Act is Rs.25, 000. For those paying 5.20 percent, 20.8 percent and 31.2 percent charge is Rs.1, 300, Rs.5, 200, and Rs.7, 800 individually. 
  • Health Checkups: Within the maximum limit of Rs.25, 000 or Rs.30, 000 reference to the age, the preventive health check-ups get a benefit of up to Rs.5,000. This means if you pay a health insurance payment of Rs.20,000 towards a medical claim and undergo a health check-up costing Rs.5,000 then, the total of Rs.25,000 can be availed under section 80D. Most prominent hospitals offer preventive health checkup packages.
  • The individual who has claimed for health insurance an avail tax benefit up to Rs.80, 000. This might vary depending on the life insurance or health insurance payments made by you for your parents (above 60years or more)
  • For the individual who pays the health insurance is above 60 years and still pay a premium for your parents then you can avail a tax exemption up to Rs.1, 00, 000.According to Income Tax law, you can always avail of a tax exemption of Rs.5, 000 for all the expenses incurred for the preventive health check-ups for your parents above age 60 or more.
ScenarioTax exemption on premiums paidTax relation on preventive health check-upsTotal tax exemption
When you and your parents are below age 60Rs.25, 000 + Rs. 25, 000Rs.5,000Rs.55, 000
When you are below 60 and your parents are above 60 and moreRs.25, 000+ Rs.50, 000Rs.5,000Rs,80,000
When you and your parents are above 60Rs.50,000+ Rs.50,000Rs.7,000Rs.1,07,000

Tax deduction under section 80D

Every insured individual can claim a deduction of up to Rs.25, 000 per budgetary year for claimed medical insurance installments. This policy can be bought either for you, your spouse, children, or your parents. If you and your spouse are above 60 and more then, you can avail tax deduction of up to Rs.50, 000. In case you make premium payments on cash than, you will not be liable for tax exemption. 

ScenarioPremium paid Deduction under section 80D
 Self, family, childrenParents 
You and parents below 6025,00025,00050,000
You and family below 60 but parents above 6025,00050,00075,000
Both you, family and parents above 6050,00050,0001,00,000
Members of HUF25,00025,00050,000
Non-resident individual25,00025,00025,000

Deduction for Individuals: An insured individual can claim a deduction of up to Rs.25, 000 for self, spouse, children and parents. If the parents are below 60years of age then an additional deduction of Rs.25, 000 for the insurance can be incurred. Whereas for parents above 60years deduction can be extended up to Rs.50, 000. If both the taxpayer and the parents are above 60 and more then, a maximum deduction of Rs.1, 00,000 can be availed under section 80D of the Income Tax Act. 

Deduction for HUF: Hindu undivided families (HUF) can claim a deduction of up to Rs.25, 000 under section 80D of Income Tax Act if age is less than 60. Whereas for age 60 years or more the deduction can be up to Rs.50, 000.

Tax benefits for senior citizens on health insurance

Health insurance or life insurance payments for senior residents are consistently on the higher side. Insurance agencies may likewise be unwilling towards giving clinical protection to individuals who are old or experience the ill effects of previous afflictions. Be that as it may, Budget 2018 accompanied some alleviation for senior citizens of India who have high clinical costs and can’t accepting health care coverage strategy because of prior infirmities or can’t bear to pay high charges. 

The Budget has corrected Section 80D which permits a deduction for medical costs caused on senior residents. This derivation can be guaranteed by the senior resident himself/herself or by his/her children if the children are bringing about medical costs for their senior citizen parents

Factors to consider when buying a health insurance

Phoenix Tax- tax consultants in Chennai advise you to consider these few when buying health insurance:

Understand the needs: before buying health insurance make sure it covers all your requirements. In case your parents require treatment in two years of time see to it if the policy covers it. Some employer’s health insurance groups may not partially cover the surgery charges of your aging parents. 

Look for a long-term policy: Choose a medical insurance policy that covers your parent’s medical expenses for their entire life. Make sure to buy the medical insurance policy before the age of 69 for your parents.

Medical check-up not required until the age of 69: In case you are living away from your parents then you can opt for medical insurance that does not ask for a health check-up until the age of 69.

Look for a specialist to assist you: Look for an advisor who can help you choose the best health insurance policy that suits your requirements.

Know the renewal time: A medical insurance policy will come to an end after a certain period. Some health insurance policies cease renewals at the age of 70 so make sure to know the renewal time before buying an insurance policy.

Share the appropriate health history: Always give the appropriate health history of your parents to the insurer. Any misinterpretation of your parent’s health history may result in the cancellation of the policy.

Health insurance not only covers your medical expenses but also makes you eligible for deduction under section 80D of the Income Tax act Health care coverage other than shielding your pocket from clinical costs, you can profit tax reductions on the expenses paid towards your health insurance policy under Section 80D of the Income Tax Act. This makes a health care insurance policy an advantageous tax-saving tool which is certainly an insightful venture to make for your future.