Health insurance is necessary due to the increased spread of disease and hospital costs. The government offers tax incentives to promote health insurance. Section 80D of the Income Tax Act 1961 provides tax relief for purchasing health insurance.
What is term insurance?
The policy offers a payout to the nominees, in case of the policyholder’s sudden and unfortunate passing, for pre-payments called premiums.
Medical situations are generally unpredictable. Hence, having health insurance is always a good idea. Most Indians lack health insurance; therefore, they rely on savings or loans in emergencies. Section 80D tax incentives encourage everyone to buy medical insurance.
What is Section 80D?
Section 80D allows “Individuals” and “HUFs” to deduct health insurance premiums from their income. This deduction applies to top-up health plans, critical illness insurance, and riders. The deduction is available when buying health insurance for yourself, your spouse, dependent children, or your parents. Best of all, this deduction(s) can be claimed with Section 80C deductions. This can also apply to the term plans.
Who qualifies for Section 80D deductions?
Only individuals and HUFs can deduct senior citizens’ medical insurance premiums and expenses. For individual or HUF taxpayers, insurance can be availed for:
- Self \ Spouse
- Minors
- Dependent Parents
- Parent-in-laws
- Other entities cannot claim this deduction. For example, companies and firms cannot deduct under this Section.
Which payments are deductible under Section 80D?
The following payments are Section 80D-deductible for individuals and HUFs:
- A non-cash health insurance premium for oneself, spouse, children, or dependent parents.
- Health screening costs
- Treatment of a non-insured elderly (60+).
- The Central Government’s health scheme or other government-announced programme payouts.
- Term planwith certain medical riders
80D deduction
The following criteria show an individual taxpayer’s deduction eligibility:
Individual:
Individual taxpayers can deduct up to 25,000 for health insurance for themselves, their spouses, and dependent children. If your parents are over 60, you may be eligible for Rs. 50,000 deductions. Just Rs. 25,000 can be deducted if your parents are under 60. You may be able to deduct up to Rs. 50,000 for medical expenses for elderly persons (yourself, your spouse, your dependent children, or your parents) not covered by health insurance. Like health insurance, premiums from term insurance with medical riders can also be claimed under this Section. Do check out what is term insurance.
If the taxpayer and their parents are over 60 and have medical insurance, this Section allows a maximum deduction of Rs. 1,00,000. If the elderly (taxpayer/family and parents) do not have health insurance, you can deduct medical costs up to the allotted limit.
Hindu Undivided Family
Section 80D deducts HUF member medical claims. The deduction is Rs. 25,000 for covered members under 60 and Rs. 50,000 for those over 60.
Section 80D preventive health check-ups
To encourage preventative health care, the government authorised a deduction in 2013–14. Preventative health check-ups detect diseases early and reduce risk factors. Section 80D permits a deduction for preventative health examinations. Rs. 5,000 deduction is allowed under Section 80D for any payments made towards preventative health check-ups. The total deduction will be at most Rs. 25,000 or Rs. 50,000 rupees, as applicable. Also, remember to check out term insurance tax benefits.
The individual can claim this deduction for himself, his spouse, dependent children, and his parents.
Single-premium health insurance deduction under Section 80D
The 2018 budget provided a concession for single-premium health insurance coverage. This Section can also be used for term insurance tax benefits only if additional medical riders have been added. The new rule allows taxpayers to claim a deduction under Section 80D of a lump sum premium payment for a multi-year insurance policy. The fraction is computed by dividing the lump sum premium by the insurance duration. However, Rs. 25,000 or Rs. 50,000 would again apply.
Health insurance purchases for 80D deduction should consider the following:
- Tax benefits cannot be claimed for medical insurance for siblings, grandparents, aunts, uncles, or other family members.
- Working children’s premiums cannot be tax credited.
- If you and a parent share the bill, each can deduct their share.
- The deduction should not include service tax and cess from the premium.
- Company-provided health insurance premiums are not deductible.
- Deductible premiums include non-cash payments. Hence, online or credit card premiums can be deducted.
Section 80D exclusions
- The taxpayer must pay health insurance premiums for Section 80D tax advantages. Third-party premium payments do not qualify for tax benefits. Cash premium payments disqualify taxpayers from tax benefits.
- Goods and Service Tax on premium payments
- Group Health Insurance except when increasing the total group cover, in which case the additional amount can be deductible.
Standard T&C Apply
There are 2 tax regimes in India – new and old. Choose the correct one after consulting an expert to get the tax benefit you desire. You can opt for a regime change during the next financial year.
All savings are provided by the insurer per the IRDAI-approved insurance plan. Standard T&C apply.
