fbpx

Maximize Your Tax Benefits: The Role of Health Insurance in Saving Taxes in India

Health insurance has become necessary in India, especially considering the rising healthcare costs and the unpredictability of medical emergencies. Beyond its role in securing health, health insurance also provides significant tax benefits that individuals and families can take advantage of under various sections of the Income Tax Act. This dual advantage makes health insurance an essential financial tool.

Health insurance is not only crucial for safeguarding your health and well-being but also offers valuable tax benefits under the Income Tax Act of India. Whether you’re paying premiums for yourself, your family, or your parents, there are substantial deductions that can help reduce your tax burden. In this blog, we’ll take a closer look at the tax benefits of health insurance in India and how you can leverage them to save money.

While medical emergencies can be expensive, ensuring you have proper health coverage also allows you to save on taxes, which helps improve your overall financial health. So, how can you benefit from these deductions? Let’s explore this in detail.

The Tax Benefits of Health Insurance

The main tax benefit you can claim for health insurance premiums is under Section 80D of the Income Tax Act. This section allows you to claim deductions for premiums paid for yourself, your spouse, children, and parents, which reduces your taxable income. Let’s break it down:

  • For individuals below 60 years of age : You can claim a deduction of up to ₹25,000 on the premiums paid for yourself, your spouse, children, and parents.
  • For senior citizens (60 years or above) : The deduction limit increases to  ₹50,000 if the premium is paid for senior citizen parents, and for yourself, the deduction also increases to ₹50,000 if you’re a senior citizen.
  • For super senior citizens (80 years or above) : They can claim a deduction of up to ₹50,000 on medical treatments, whether or not they have health insurance.

Preventive Health Check-ups

Under Section 80D, taxpayers can also claim deductions for preventive health check-ups. You can claim a maximum of ₹5,000 for preventive check-ups, which is included in the overall ₹25,000 or ₹50,000 limit depending on the age group. This not only helps you stay healthy but also saves you money during tax filing.

Family Floater Plans

If you purchase a family floater health insurance plan, the premium paid for the entire family (spouse, children, and parents) qualifies for tax benefits. For example, if you pay ₹30,000 as a premium for a family floater policy, you can claim the full amount under Section 80D . This is a more economical option for covering your family while availing tax benefits.

Deduction for Medical Expenses of Senior Citizens

For senior citizens, Section 80D also provides a separate deduction for medical expenses. If your senior citizen parents don’t have health insurance, you can claim a deduction of up to ₹50,000 on the medical expenses incurred for their treatment. This is an additional benefit for those taking care of elderly parents.

Health Insurance and Tax Saving: Exclusions to Note

Health insurance tax benefits under Section 80D may be disqualified in the following cases:

  • If the health insurance premium was not paid within the financial year.
  • If the claimed deduction exceeded specified limits.
  • If the premium was paid in cash.
  • If a premium payment receipt was not provided.
  • If the premium was paid by someone other than the individual claiming the deduction.
  • If the premium was paid for a policy covering in-laws, siblings, friends, etc., rather than dependents.

Documents Required to Claim Medical Insurance Tax Benefits under Section 80D

To claim tax benefits on medical insurance under Section 80D, the following documents should be prepared:

  • Premium payment receipts:  These receipts must be provided to claim tax benefits for the health insurance policy.
  • Policy documents: The policy document serves as proof of purchase and coverage.
  • Preventive health check-up receipts: If a health check-up was conducted within the financial year, these receipts may be submitted to claim the benefit.

Although these documents are not required when filing tax returns, keeping them accessible is recommended in case of a tax review.

Important Considerations for Section 80D Exemptions

Certain factors should be considered before claiming exemptions under Section 80D:

  • Health insurance premiums paid in cash disqualify the tax deduction; only non-cash payments (demand draft, cheque, net banking, debit, and credit cards) qualify.
  • Only premiums paid within the relevant financial year qualify for the deduction. For instance, to claim for FY23, the premium must have been deposited between April 1, 2022, and March 31, 2023.
  • Deduction amounts apply solely to the premium, excluding GST, bank fees, etc.

Conclusion: 

In conclusion, the tax benefits of health insurance are an excellent way to reduce your tax liability while securing yourself and your family from unexpected medical expenses. The provisions under Section 80D of the Income Tax Act ensure that the cost of health insurance is made more affordable, making it an investment that not only protects you but also offers considerable savings on taxes.

To make the most of these tax benefits, it’s important to carefully choose the right health insurance policy, consider the age and health conditions of your dependents, and ensure that premium payments are made through appropriate channels. You can also explore additional options like preventive check-ups and medical expense deductions for senior citizens to maximize your savings.

By understanding and utilizing these deductions, you can effectively plan your taxes and enhance your overall financial health.

FAQ‘s

  1. What is the tax deduction limit for health insurance premiums under Section 80D?

    The limit is ₹25,000 for individuals below 60 years and ₹50,000 for senior citizens. For super senior citizens, the deduction can go up to ₹50,000 for medical expenses.

  2. Can I claim tax deductions for medical expenses without health insurance?

    Yes, if you have senior citizen parents who don’t have health insurance, you can claim a deduction of up to ₹50,000 for their medical expenses.

  3. Are health check-ups eligible for tax deductions?

    Yes, you can claim up to ₹5,000 for preventive health check-ups under Section 80D, which is included in the overall deduction limit.

  4. Can I claim tax benefits for health insurance premiums paid for my children?

    Yes, premiums paid for your dependent children are eligible for tax deductions under Section 80D.

Contents

Frequently Asked Questions (FAQs):

Finnable has set a required minimum age for personal loan of 21 years for individuals to be eligible for a personal loan. This ensures that applicants have reached legal adulthood and are capable of entering into a financial agreement.

Yes, Finnable understands the financial needs of young borrowers and offers personalised loan options tailored to their specific requirements. Whether it's financing higher education, purchasing essential items, or starting a business venture, Finnable provides support to young individuals seeking financial assistance.

Borrowers nearing retirement may have unique financial needs, such as retirement planning, medical expenses, or supporting their children's education. Finnable offers personalised loan solutions that consider the specific circumstances of pre-retirement individuals, helping them meet their financial goals.

Unfortunately, no. Finnable does not, at the moment, offer any loans to senior citizens. Currently, 60 is the maximum age for personal loans set by Finnable

Other than personal loan age limits, Finnable considers various other factors for determining loan eligibility. These factors may include the applicant's income, credit score, repayment capacity, and employment stability. By assessing these aspects comprehensively, Finnable ensures that borrowers across different age groups can access the loan products that best suit their financial needs. 

 

Amit Arora

I am a seasoned retail banker with over 21 years of global experience across business, risk and digital. In my last assignment as Global Head Digital Capabilities, I drove the largest change initiative in the bank to deliver the end-to-end digital program with over US$1 billion in planned investment. Prior to that, as COO for Group Retail Products & Digital, I implemented a risk management framework for retail banking across the group.
Finnable Logo