Health insurance is important to access quality healthcare services and manage related costs. Beyond its primary role, health insurance also comes with significant tax benefits. One can enjoy these deductions only when they file their taxes as per the old tax regime. These benefits can help policyholders save money while protecting their health. Let’s check the key tax benefits of health insurance in India.
Section 80D of the Income Tax Act, 1961
Under Section 80D, individuals can benefit from tax deductions on health insurance premiums. Taxpayers can claim deductions on the premiums paid for themselves, their spouses, children, and parents.
Deduction Limits
- Individual and Family: An individual can claim up to ₹25,000 for premiums paid. These are applicable to policies for the self, spouse, and dependent children.
- Parents: An additional deduction of up to ₹25,000 is available for premiums paid for parents. If the parents are senior citizens (aged 60 years or more), the deduction limit increases to ₹50,000.
Thus, an individual can claim a total deduction of ₹50,000 if the taxpayer and parents are below 60 years. They can get a tax benefit of up to ₹75,000 if the parents are senior citizens. If both the taxpayer and parents are senior citizens, the deduction can go up to ₹1 Lakh.
Section 80D also allows for a deduction for the costs of preventive health check-ups. The limit is ₹5,000 within the overall limit of ₹25,000 or ₹50,000, depending on the age of the insured.
Super senior citizens (aged 80 years or more) who may not have health insurance can still benefit. Expenses incurred on a medical treatment of up to ₹50,000, are eligible for deduction u/s 80D.
Section 80DD and Section 80DDB
These sections provide deductions for medical expenses related to specific illnesses and disabilities.
Section 80DD
This section allows deductions for expenses related to treating a specially-abled dependent. The deduction limits are:
- ₹75,000 for minor disability (40% to 80%)
- ₹1.25 Lakhs for severe disability (80% or more)
Section 80DDB
Under this section, deductions are available for medical expenses incurred for specific diseases. The deduction limits are:
- ₹40,000 for individuals below 60 years
- ₹1 Lakh for senior citizens and super senior citizens
Additional Tax Benefits
Here are some scenarios for which you can enjoy additional tax benefits:
Critical Illness Policies
Critical illness policies provide coverage in the case of severe conditions like cancer. Premiums paid for these are eligible for deductions u/s 80D. It is calculated in a manner that is similar to regular health insurance policies.
Group Health Insurance
Employers often provide group health insurance to employees. The premium paid by the employer is not taxed as a prerequisite for the employee. Also, any premium the employee pays to improve the coverage can be claimed as a deduction u/s 80D.
Top-up Plans
Top-up health insurance plans offer additional coverage beyond a threshold limit. The premiums paid for these plans are eligible for tax deductions under Section 80D. This provides an additional opportunity for saving taxes.
Important Considerations
Here are some things to keep in mind to make the most of tax benefits available on health insurance:
- Mode of Payment: Deductions u/s 80D are allowed only if premiums are paid through non-cash modes. These include cheques, bank transfers, or credit/debit cards.
- Policy: The health insurance plan must approved by a recognised insurer in India
- Dependents: Only premiums paid for dependent children are eligible for deductions. Premiums paid for independent working children are not deductible.
- Premiums: If the premium covers only part of the fiscal, the benefit can be claimed proportionally
Taxpayers must provide proof of payment to get tax benefits on insurance premiums. This can include receipts from the insurer, bank statements, and policy documents. It is crucial to maintain these records for filing your ITR and during tax assessments.
Tax Implications on Maturity Benefits
Understanding the tax implications of maturity benefits from health insurance is essential. This is especially true for policies that offer a return of premium. Usually, the maturity benefits from a health insurance policy are tax-free u/s 10(D) of the Income Tax Act, 1961. However, this exemption is applicable only if the premium paid is not more than 10% of the sum assured. This is applicable for policies issued on or after April 1, 2012. For policies issued before this date, the premium should not exceed 20% of the sum assured.
Health Insurance for Non-Resident Indians (NRIs)
NRIs are also eligible for tax benefits on premiums paid for such policies in India. The provisions u/s 80D apply similarly to NRIs. This enables them to claim deductions for premiums paid for themselves and their family in India. NRIs must provide proof of payment for the premiums to claim the deduction. The payment should be made from an NRE or NRO account. Also, all receipts and policy documents should be retained for tax filing purposes.
Make health insurance policies a part of your portfolio and tax-saving strategy. To get started, you can check health insurance on Bajaj Markets. Choose from leading insurance providers in the country to find a plan that suits your needs.
Understanding the tax benefits of health insurance is crucial for maximising savings. This helps ensure comprehensive healthcare coverage at minimal costs. Taxpayers can reduce their taxable income with the provisions u/s 80D, 80DD, and 80DDB of the Income Tax Act.
Proper planning and knowledge of applicable deductions can lead to substantial financial benefits. Always consult with an expert to ensure compliance with tax laws. Optimise your health insurance benefits by planning your taxes properly. Head on over to bajajfinservmarkets.in and get started today!
